Optimal Retirement Policies with Present-Biased Agents

2020 ◽  
Author(s):  
Pei Cheng Yu
Keyword(s):  
Private Information ◽  
Hyperbolic Discounting ◽  
Time Inconsistency ◽  
Retirement Savings ◽  
Present Bias ◽  
Optimal Mechanism ◽  
Savings Accounts ◽  
The Government ◽  
Social Security Benefits ◽  
Retirement Policies

Abstract This paper incorporates quasi–hyperbolic discounting into a Mirrlees taxation model to study the design of retirement policies for present-biased agents. I show that the government can improve the screening of productivity by exploiting time inconsistency. This is done by providing commitment to sophisticated agents and taking advantage of the incorrect beliefs of naïve agents. This can be achieved even if the degrees of present bias and sophistication are private information. I also demonstrate how the government can implement the optimal mechanism using retirement savings accounts and social security benefits.

scholarly journals A Model of Focusing in Economic Choice*

2012 ◽  
Vol 128 (1) ◽  
pp. 53-104 ◽  
Author(s):  
Botond Kőszegi ◽  
Adam Szeidl
Keyword(s):  
Intertemporal Choice ◽  
Hyperbolic Discounting ◽  
Time Inconsistency ◽  
Monetary Incentives ◽  
Present Bias ◽  
Advantages And Disadvantages ◽  
Economic Choice ◽  
Lifestyle Choices ◽  
Ex Ante ◽  
A Current

Abstract We present a generally applicable theory of focusing based on the hypothesis that a person focuses more on, and hence overweights, attributes in which her options differ more. Our model predicts that the decision maker is too prone to choose options with concentrated advantages relative to alternatives, but maximizes utility when the advantages and disadvantages of alternatives are equally concentrated. Applying our model to intertemporal choice, these results predict that a person exhibits present bias and time inconsistency when—such as in lifestyle choices and other widely invoked applications of hyperbolic discounting—the future effect of a current decision is distributed over many dates, and the effects of multiple decisions accumulate. But unlike in previous models, in our theory (1) present bias is lower when the costs of current misbehavior are less dispersed, helping explain why people respond more to monetary incentives than to health concerns in harmful consumption; and (2) time inconsistency is lower when a person commits to fewer decisions with accumulating effects in her ex ante choice. In addition, a person does not fully maximize welfare even when making decisions ex ante: (3) she commits to too much of an activity—for example, exercise or work—that is beneficial overall; and (4) makes “future-biased” commitments when—such as in preparing for a big event—the benefit of many periods’ effort is concentrated in a single goal.

scholarly journals The financial feasibility of delaying Social Security: evidence from administrative tax data

2017 ◽  
Vol 17 (4) ◽  
pp. 419-436 ◽  
Author(s):  
GOPI SHAH GODA ◽  
SHANTHI RAMNATH ◽  
JOHN B. SHOVEN ◽  
SITA NATARAJ SLAVOV
Keyword(s):  
Social Security ◽  
Retirement Age ◽  
Retirement Savings ◽  
Financial Assets ◽  
Individual Retirement Accounts ◽  
Savings Accounts ◽  
Retirement Accounts ◽  
Social Security Benefits ◽  
The Relationship ◽  
Retirement Study

AbstractDespite the large and growing returns to deferring Social Security benefits, most individuals claim Social Security before the full retirement age. In this paper, we use a panel of administrative tax data on individuals likely to financially benefit from delaying Social Security claiming to explore the relationship between Social Security claiming and distributions from tax-advantaged retirement savings accounts. We find that the majority of our sample claim Social Security prior to taking distributions from Individual Retirement Accounts (IRAs). We also find that a third of our sample have IRA balances equivalent to at least two additional years of Social Security benefits, and a quarter have IRA balances equivalent to at least 4 years of Social Security benefits. We complement our analysis with data from the Health and Retirement Study and find that these percentages are considerably higher when other financial assets are taken into account.

Do expectations for post-retirement family and government support crowd out pre-retirement savings? Insights from the working-age population in Thailand

2021 ◽  
pp. 1-19
Author(s):  
Nopphol Witvorapong ◽  
Yong Yoon ◽  
Wiraporn Pothisiri
Keyword(s):  
Old Age ◽  
Filial Piety ◽  
Government Support ◽  
Financial Security ◽  
Retirement Savings ◽  
Family Transfers ◽  
Retirement Expectations ◽  
Working Age ◽  
Nationally Representative ◽  
The Government

Abstract Based on nationally representative data (N = 8,901), this study investigates the extent to which expectations for intra-family transfers and government assistance in old age impact the probability of saving for retirement among working-age individuals in Thailand. Results show that expectations for financial non-self-reliance and expectations that family support would constitute the most important source of old-age financial security reduce the probability that working-age individuals would save for retirement. Expectations for government support have no impact on average. Given that filial piety is weakening in Thailand, this study suggests that the government encourage pre-retirement savings more strongly.

Time Preferences across Language Groups: Evidence on Intertemporal Choices from the Swiss Language Border*

2021 ◽  
Author(s):  
Holger Herz ◽  
Martin Huber ◽  
Tjaša Maillard-Bjedov ◽  
Svitlana Tyahlo
Keyword(s):  
Hyperbolic Discounting ◽  
Time Preferences ◽  
Discount Factor ◽  
Socioeconomic Conditions ◽  
Measuring Time ◽  
Present Bias ◽  
Language Groups ◽  
Long Run ◽  
Intertemporal Choices

Abstract Differences in patience across language groups have recently received increased attention in the literature. We provide evidence on this issue by measuring time preferences of French and German speakers from a bilingual municipality in Switzerland where institutions are shared and socioeconomic conditions are very similar across the two language groups. We find that French speakers are significantly more impatient than German speakers, and differences are particularly pronounced when payments in the present are involved. Estimates of preference parameters of a quasi-hyperbolic discounting model suggest significant differences in both present bias (β) and the long-run discount factor (δ) across language groups.

scholarly journals Active vs. Passive Decisions and Crowd-Out in Retirement Savings Accounts: Evidence from Denmark *

2014 ◽  
Vol 129 (3) ◽  
pp. 1141-1219 ◽  
Author(s):  
Raj Chetty ◽  
John N. Friedman ◽  
Søren Leth-Petersen ◽  
Torben Heien Nielsen ◽  
Tore Olsen
Keyword(s):  
Government Expenditure ◽  
Wealth Accumulation ◽  
Retirement Savings ◽  
Total Saving ◽  
Savings Accounts ◽  
Retirement Accounts ◽  
Tax Subsidies ◽  
Crowd Out ◽  
Savings Rates

Abstract Using 41 million observations on savings for the population of Denmark, we show that the effects of retirement savings policies on wealth accumulation depend on whether they change savings rates by active or passive choice. Subsidies for retirement accounts, which rely on individuals to take an action to raise savings, primarily induce individuals to shift assets from taxable accounts to retirement accounts. We estimate that each $1 of government expenditure on subsidies increases total saving by only 1 cent. In contrast, policies that raise retirement contributions if individuals take no action—such as automatic employer contributions to retirement accounts—increase wealth accumulation substantially. We estimate that approximately 15% of individuals are “active savers” who respond to tax subsidies primarily by shifting assets across accounts; 85% of individuals are “passive savers” who are unresponsive to subsidies but are instead heavily influenced by automatic contributions made on their behalf. Active savers tend to be wealthier and more financially sophisticated. We conclude that automatic contributions are more effective at increasing savings rates than subsidies for three reasons: (i) subsidies induce relatively few individuals to respond, (ii) they generate substantial crowd-out conditional on response, and (iii) they do not increase the savings of passive individuals, who are least prepared for retirement.

scholarly journals Resolving Time Inconsistency of Decision Problem with Non-expectation Operator: From Internal Conflict to Internal Harmony by Strategy of Self-Coordination

2020 ◽  
Author(s):  
Xiangyu Cui ◽  
Duan Li ◽  
Yun Shi
Keyword(s):  
Decision Maker ◽  
Decision Problem ◽  
Hyperbolic Discounting ◽  
Time Inconsistency ◽  
Internal Conflict ◽  
Equilibrium Strategy ◽  
Game Model ◽  
Long Run ◽  
Short Run ◽  
Time Inconsistent

When a stochastic decision problem is time inconsistent, the decision maker would be puzzled by his conflicting decisions optimally derived from his time-varying preferences at different time instants (with different time horizons). While the long-run self (LR) of the decision maker pursues the long-term optimality, the short-run selves (SRs) of the decision maker at different time instants bow to short-term temptations. While the literature began to recognize the importance to strike a balance between LR's and SRs' interests, the existing results are not applicable to situations where the decision maker's preferences involve non-expectation operators. We propose an operable unified two-tier dual-self game model with commitment by punishment, which can cope with general time inconsistent stochastic decision problems with both expectation and non-expectation operators in the objective function. By attaching punishment terms to both the preferences of LR and SRs which quantitatively evaluate the internal conflict among different selves, our game model aligns the interests of the LR and SRs to a certain degree. The equilibrium strategy, termed strategy of self-coordination, achieves some degree of internal harmony among various selves. We successfully apply the model to the investment and consumption problem with quasi-hyperbolic discounting and the dynamic mean-variance portfolio selection problem.

scholarly journals Manajemen Privasi Jemaat Ahmadiyah di Kota Semarang

2018 ◽  
Vol 1 (2) ◽  
pp. 39
Author(s):  
Muhammad Syaoki
Keyword(s):  
Private Information ◽  
Management Theory ◽  
Privacy Management ◽  
Indirect Communication ◽  
Communication Privacy Management ◽  
Communication Privacy Management Theory ◽  
Hide Information ◽  
Dialectical Process ◽  
The Government ◽  
Communication Privacy

Abstrak:    Penelitian ini bertujuan untuk menggambarkan perilaku komunikasi Jemaat Ahmadiyah dalam posisi mereka sebagai kelompok yang dilarang menyebarkan ajarannya.  Dengan menggunakan teori manajemen privasi komunikasi yang diperkenalkan oleh Sandra Petronio, penelitian ini berusaha menjelaskan proses dialektis yang dilakukan oleh jemaat Ahmadiyah di kota Semarang ketika berinteraksi dengan banyak orang dalam kehidupan sehari-hari. Hasil penelitian ini menunjukkan bahwa Jemaat Ahmadiyah melakukan pembukaan informasi privat dengan komunikasi langsung dan tidak langsung. Jemaat Ahmadiyah melakukan pembukaan informasi privat bertujuan untuk mengklarifikasi kesalahpahaman ghair tentang Ahmadiyah. Jemaat Ahmadiyah kota Semarang cenderung menutup informasi privat mereka kepada keluarga dan teman ketika mereka baru berbai’at. Mereka juga menutup informasi privat kepada orang-orang Muhammadiyah, serta kepada kelompok-kelompok Islam garis keras, seperti FPI, LDII, termasuk juga kader PKS. Tetapi mereka membuka informasi mengenai Ahmadiyah kepada orang-orang dari kalangan NU, dan aparatur pemerintah. Abstract :   This research aims to describe the behavior of Ahmadiyyah community in their position as a group that is prohibited from spreading its teachings. Using the communication privacy management theory introduced by Sandra Petronio, this research attempts to explain the dialectical process undertaken by the Ahmadiyah community in the Semarang city while interacting with many people in everyday life. The results of this study indicate that the Ahmadiyyah community conducts the opening of private information with direct and indirect communication. The Ahmadiyah community conducted the opening of private information aimed to clarify misunderstanding about “ghair” of Ahmadiyah. The Ahmadiyah community of Semarang tends to hide their private information from family and friends when they are newly banned. They also hide private informations to Muhammadiyah people, as well as to hard-line Islamic groups, such as FPI, LDII, as well as PKS cadres. But they do not hide information about Ahmadiyyah to people from the NU, and the government apparatus.

Rules versus Discretion in Bank Resolution

2020 ◽  
Vol 33 (12) ◽  
pp. 5594-5629 ◽  
Author(s):  
Ansgar Walther ◽  
Lucy White
Keyword(s):  
Private Information ◽  
Optimal Policy ◽  
Financial Crises ◽  
Public Information ◽  
Time Inconsistency ◽  
Bank Resolution ◽  
Public Signals ◽  
Rules Versus Discretion

Abstract Recent reforms have given regulators broad powers to “bail-in” bank creditors during financial crises. We analyze efficient bail-ins and their implementation. To preserve liquidity, regulators must avoid signaling negative private information to creditors. Therefore, optimal bail-ins in bad times only depend on public information. As a result, the optimal policy cannot be implemented if regulators have wide discretion, due to an informational time-inconsistency problem. Rules mandating tough bail-ins after bad public signals, or contingent convertible (co-co) bonds, improve welfare. We further show that bail-in and bailout policies are complementary: if bailouts are possible, then discretionary bail-ins are more effective.

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