Finance seminar with David Laibson, Harvard University

On October 26, 2018 David Laibson, Harvard University will be giving a seminar on the paper: “Borrowing to Save? The Impact of Automatic Enrollment on Debt”.

Friday, October 26, 2018 - 11:00 to 12:15

The Department of Finance is proud to announce the upcoming seminar with David Laibson, Harvard University.

David Laibson will present:

PDF iconBorrowing to Save? The Impact of Automatic Enrollment on Debt


Authors:
John Beshears
James J. Choi
David Laibson
Brigitte C. Madrian
William L. Skimmyhorn
 

Abstract:
How much of the retirement savings induced by automatic enrollment is offset by increased borrowing outside the retirement savings plan? We study a natural experiment created when the U.S. Army began automatically enrolling its newly hired civilian employees into the Thrift Savings Plan (TSP) at a default contribution rate of 3% of income. Four years after hire, automatic enrollment causes no significant change in debt excluding auto loans and first mortgages (point estimate = 0.9% of income, 95% confidence interval = [-0.9%, 2.7%]). Automatic enrollment does significantly increase auto loan balances by 2.0% of income and first mortgage balances by 7.4% of income. These secured liabilities have muted immediate effects on net worth because they are used to acquire assets, but their increase could signal that automatic enrollment previously decreased non-TSP assets. Larger secured loans could also decrease long-run net worth through greater depreciation and financing costs.
 

Location:
Solbjerg Plads 3,
2000 Frederiksberg
Room: SPs13

The page was last edited by: Department of Finance // 10/08/2019