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

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

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.

Solbjerg Plads 3,
2000 Frederiksberg
Room: SPs13

The page was last edited by: Department of Finance // 10/09/2018