Active Vs. Passive Decisions and Crowdout in Retirement Savings Accounts.

Chetty et al. (2012)
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Summary by 
Mark Egan

The authors used 45 million observations from Denmark to see whether retirement savings policies – such as tax subsidies or employer-provided pension plans – increase total saving for retirement or simply induce shifting across accounts. They find that automatic contributions are more effective at increasing savings rates than price subsidies for three reasons: (1) subsidies induce relatively few individuals to respond, (2) they generate substantial crowd-out conditional on response, and (3) they do not influence the savings behavior of passive individuals, who are least prepared for retirement.