Department Seminar

Speaker: Cormac O'Dea (google.com)

Title: Efficiency in Household Decision Making: Evidence from the Retirement Savings of U.S. Couples (with Taha Choukhmane and Lucas Goodman)

Format: Hybrid (1B6 and Zoom)

Organiser: Matan

Abstract: Pareto Efficiency is a core assumption of most models of household decision-making. We test this assumption using a new dataset covering the retirement saving contributions of over a million U.S. individuals. While a vast literature has failed to reject household efficiency in developed countries, we find evidence of widespread inefficiency in our setting: retirement contributions are not allocated to the account of the spouse with the highest employer match rate. This lack of coordination cannot be explained by inertia, auto-enrollment, or simple heuristics. Instead, we find that indicators of weaker marital commitment correlate with the incidence of inefficient allocations.