The Effect of Providing
g Peer
Information on Retirement
S i
Savings
Decisions
D i i
JJohn
h Beshears,
B h
James
J
J.J Choi,
Ch i
David Laibson, Brigitte C. Madrian,
Katherine L. Milkman
Why might people imitate peers?
Peers know something that I don’tt
Peers know something that I don
(Banjeree, 1992; Bikhchandi, Hirshleifer, and Welch, 1992; Ellison and Fudenberg, 1993)
Peer behavior reveals social norms
(Akerlof 1980 Bernheim 1994 Akerlof and Kranton, 2000)
(Akerlof, 1980; Bernheim, 1994; Akerlof
and Kranton 2000)
Empirical
p
evidence of p
peer effects
Retirement savings
Stock market participation
Stock market participation
Technology adoption
Criminal activity
Education
Welfare usage
Car purchases
Car purchases
Contraception
Littering
Social norms marketing
T ll
Tell people what their peers do
l
h h i
d
Field evidence of social norms
marketing efficacy
Restaurant entrée selection
Music downloads
Small charitable donations
Towel re‐use in hotels
Theft of petrified wood
Stated intentions to vote
Household energy consumption
48% of U.S. 4‐year colleges and
colleges and universities have conducted a
conducted a social norms marketing k ti
campaign
Today: Field experiment at a large firm to test the effect of social marketing on savings
the effect of social marketing on savings
Target employees: 401(k) non participants
Target employees: 401(k) non‐participants
Treatment: Randomized receipt of information Randomized receipt of information
about peer 401(k) participation rates
Measured outcome: Recipients’ subsequent 401(k) enrollments
( )
Social market to increase
retirement saving?
Fortune 500 manufacturing firm
20% of workers unionized
401(k) plan
Immediate eligibility
• Immediate eligibility
• 21 mutual funds (11 target date)
Match thresholds
Match structure 1
Match threshold
Match
threshold
6%
M t h t t
Match structure 2
2
2%
2% up to $325
t $325
Match structure 3
8%
Match structure 4
6%
Match structure 5
Match structure 5
4%
Match structure 6
6%
Match structure 7
0%
Automatic 401(k)
( ) enrollment
Non‐union
No
Non‐participants automatically enrolled on a ti i a t auto ati ally e olled o
January 1, 2008
New hires after January 1, 2008 automatically enrolled after 60 days
Union
Opt‐in enrollment
Sample
p selection
Non‐union
Never enrolled
Enrolled,
contributing
< 6%
Quick
E
Enrollment
ll
t
Easy
E l ti
Escalation
Union
Enrolled,
contributing
≥ 6%
Never enrolled
Enrolled,
contributing
< 6% and
< threshold
Quick
E
Enrollment
ll
t
Easy
E l ti
Escalation
Enrolled,
contributing
≥ 6% or
≥ threshold
Passivity
y taxonomy
y of sample
p
Quick Enrollment
Non‐union
Easy
Escalation
Union
Non‐union
Union
Never enrolled
Never enrolled
Enrolled,
contributing
< 6%
Enrolled,
contributing
< 6% and
< 6% and
< threshold
Active
d i i
decision
Passive
Active
d i i
decision
Active
d i i
decision
Effect of Q
QE / EE at this firm
Enrollment / Cont.
escalation
Before
Intervention
During
Intervention
Difference
QE, union
2.0%
(0.4)
7.6%
(0.8)
5.6%***
(0.9)
QE, non-union
2.9%
(0.8)
2.3%
(0.7)
-0.7%
(1.1)
EE union
EE,
88.0%
0%
(0.9)
10.6%
10
6%
(1.1)
22.6%
6%*
(1.5)
EE, non-union
9.4%
(0 5)
(0.5)
8.2%
(0 5)
(0.5)
-1.1%
(0 8)
(0.8)
Quick
Q
Enrollment
letter
without
peer
information
Quick
Q
Enrollment
letter
with
peer
information
Join the 87% of 25‐29 y
year old employees at p y
<company> who are already in the <plan>.
Easy
y
Escalation
letter
without
peer
information
Easy
y
Escalation
letter
with
peer
information
Join the 76% of 20‐29 y
year old <plan> p
participants at <company> who are already contributing
already contributing at least 6% to the <plan>.
Three randomly assigned letters (sent to non‐
participants):
• No peer information
• Information about other employees in the same 5‐year age bucket as the letter recipient
• Information about other employees in the same 5‐year age bucket as the letter recipient
Random assignment of an illustrative
24 year old employee:
24-year-old
A No peer info
A.
No peer info
B. Peer info from employees aged 20‐29 p y
g
(participation rate of 82%)
C P
C.
Peer info from employees aged 20‐24 i f f
l
d 20 24
(participation rate of 77%)
D. Also compare to 25‐year‐old employee receiving peer info from employees 25‐29
receiving peer info from employees 25‐29 (participation rate of 87%)
Peer information – Participation rates
100
90
80
70
60
50
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
Peer information – Fraction of
participants contributing >=6%
100
90
80
70
60
50
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
Peer information presence effect,
Union employees
Enrolled in next 2 months
9.9%
6.5%
No peer info
Peer info
Peer info effect:
‐3.4%*
(1.9)
Peer information presence effect,
Union non-participants
Contribution rate change
Peer info effect:
0.58%
0.39%
No peer info
Peer info
‐0.19%*
(0.10)
Peer information presence effect,
Non-union employees
Enrolled in next 2 months
Peer info effect:
2.3%
(1.3)
3.0%
0.7%
No peer info
Peer info
Peer information presence effect,
Non-union non-participants
Contribution rate change
Peer info effect:
0.13%
(0.09)
0.17%
0.04%
No peer info
Peer info
Peer information presence effect,
Union participants
Increased contrib. in next 2 months
10.6%
10.6%
Peer info effect:
‐0.1%
(2.4)
No peer info
Peer info
Peer information presence effect,
Non-union participants
Increased contrib. in next 2 months
8.2%
8.3%
Peer info effect:
0.1%
(1.1)
No peer info
Peer info
Table 6: Peer info presence effect
Enrollment /
Contribution
escalation
Peer info received
Male dummy
log(Tenure)
log(Salary)
Cont. rate dummies
log(Balance)
Sample size
Nonparticipants
participants,
union
-0.04**
(0.02)
-0.02
(0.02)
-0.03***
((0.01))
0.04**
(0.02)
No
Nonparticipants
participants,
non-union
0.02
(0.01)
-0.03
(0.02)
-0.01
((0.01))
0.05**
(0.03)
No
N = 1,024
N = 399
Participants
with low
cont rates,
cont.
rates
union
-0.01
(0.03)
-0.05**
(0.03)
-0.02
((0.01))
0.04
(0.04)
Yes
0.02**
(0.01)
N = 746
Participants
with low
cont rates,
cont.
rates
non-union
0.00
(0.01)
0.00
(0.01)
-0.02***
((0.01))
0.04***
(0.01)
Yes
0.01***
(0.00)
N = 2,753
Table 6: Peer info presence effect
Contribution rate
change
Peer info received
M l dummy
Male
d
log(Tenure)
log(Salary)
Cont. rate dummies
log(Balance)
Sample size
Nonparticipants
participants,
union
-0.21*
(0.11)
-0.08
0 08
(0.11)
-0.19***
((0.05))
0.23**
(0.11)
No
Nonparticipants
participants,
non-union
0.13
(0.08)
-0.14
0 14
(0.11)
-0.08*
((0.04))
0.33**
(0.15)
No
N = 1,024
N = 399
Participants
with low
cont rates,
cont.
rates
union
-0.02
(0.10)
-0.15
0 15
(0.10)
-0.10
((0.06))
0.16
(0.14)
Yes
0.07**
(0.03)
N = 746
Participants
with low
cont rates,
cont.
rates
non-union
0.07
(0.06)
0 02
0.02
(0.05)
-0.09***
((0.03))
0.30***
(0.10)
Yes
0.08***
(0.01)
N = 2,753
Estimating peer information number
magnitude effect
Problem
Peer number is correlated with age
Peer number is correlated with age
Age is correlated with propensity to respond
Solution
Include linear age spline with knot points every 5 years starting at age 22.5
every 5 years starting at age 22.5
Table 7: Peer info number effect
Enrollment /
Contribution
escalation
Peer info number
M l dummy
Male
d
log(Tenure)
log(Salary)
Cont. rate dummies
log(Balance)
Sample size
Nonparticipants
participants,
union
-1.74**
(0.73)
0 00
0.00
(0.02)
-0.02*
((0.01))
0.02
(0.02)
No
Nonparticipants
participants,
non-union
1.15**
(0.57)
-0.06*
0 06*
(0.03)
-0.02**
((0.01))
0.09**
(0.04)
No
N = 687
N = 264
Participants
with low
cont rates,
cont.
rates
union
2.28
(1.90)
-0.03
0 03
(0.03)
-0.01
((0.02))
0.04
(0.06)
Yes
0.01
(0.01)
N = 511
Participants
with low
cont rates,
cont.
rates
non-union
0.60
(0.81)
-0.00
0 00
(0.01)
-0.02***
((0.01))
0.04***
(0.02)
Yes
0.01***
(0.00)
N = 1,822
Effects of variation in peer behavior
For union workers, a ten percentage point p
g p
increase in the participation rate of the comparison group reduces enrollment likelihood by 17.4% (**).
For non‐union workers, a ten percentage point increase in the participation rate of the comparison group increases enrollment likelihood by 11.5% (**).
Table 7: Peer info number effect
Contribution rate
change
Peer info number
M l dummy
Male
d
log(Tenure)
log(Salary)
Cont. rate dummies
l (B l
log(Balance)
)
Sample size
Nonparticipants
participants,
union
-10.54**
(4.59)
0 04
0.04
(0.13)
-0.10*
(0.06)
0.11
(0.13)
No
Nonparticipants
participants,
non-union
5.92**
(3.01)
-0.28*
0 28*
(0.17)
-0.13**
(0.05)
0.54**
(0.23)
No
N = 687
N = 264
Participants
with low
cont rates,
cont.
rates
union
10.94
(7.09)
-0.04
0 04
(0.12)
-0.11
(0.08)
0.18
(0.21)
Yes
0 07*
0.07*
(0.04)
N = 511
Participants
with low
cont rates,
cont.
rates
non-union
8.23*
(4.24)
0 00
0.00
(0.06)
-0.12***
(0.05)
0.36**
(0.15)
Yes
0 09***
0.09***
(0.02)
N = 1,822
Table 8: Sources of identification
Enrollment
Peer info number
Nonparticipants,
i
union
-1.93**
(0.81)
Nonparticipants,
non-union
i
1.50*
(0.87)
Knocking out age bucket
discontinuities
Contribution rate
change
Peer info number
Nonparticipants,
union
-11.56**
(5.05)
Nonparticipants,
non-union
9.08*
(5.17)
Nonparticipants,
union
i
-0.77
(1.22)
Nonparticipants,
non-union
i
1.07
(1.05)
Knocking out 5‐year
vs. 10‐year peer number
y
p
difference
Nonparticipants,
union
-5.44
(7.57)
Nonparticipants,
non-union
3.63
(4.02)
Table 9: Robustness
Enrollment
Peer info number
Nonparticipants,
i
union
-1.72**
(0.73)
Nonparticipants,
non-union
i
1.44**
(0.68)
Age spline with knot
points every 2.5 years
p
y
y
Contribution rate
change
Peer info number
Nonparticipants,
union
-10.43**
(4.61)
Nonparticipants,
non-union
7.32**
(3.36)
Nonparticipants,
union
i
-1.91***
(0.72)
Nonparticipants,
non-union
i
1.06*
(0.58)
Controlling for target
retirement date fund
offered
Nonparticipants,
union
-11.55**
(4.53)
Nonparticipants,
non-union
6.21*
(3.45)
Table 9: Robustness
Enrollment
Peer info number
Nonparticipants,
i
union
-2.08***
(0.80)
Nonparticipants,
non-union
i
1.05*
(0.62)
Controls for years from
age group mean
g g
p
(linear, squared)
Contribution rate
change
Peer info number
Nonparticipants,
union
-12.46**
(4.98)
Nonparticipants,
non-union
6.06
(3.69)
Nonparticipants,
union
i
-1.76**
(0.75)
Nonparticipants,
non-union
i
1.29*
(0.68)
Controls for percentile
within age group
g g
p
(linear, squared)
Nonparticipants,
union
-10.43**
(4.65)
Nonparticipants,
non-union
7.16*
(3.91)
Possible mechanisms
Union non‐participants were surprised by how few coworkers saved
Problem: Union enrollment is decreasing in peer info number
peer info number
Possible mechanisms
Union non‐participants believe their optimal g
g
y
savings choice is negatively correlated with coworkers’ savings choices
Problem: Why don’t union participants believe the same thing?
g
Problem: Zero correlation seems plausible, but Problem:
Zero correlation seems plausible, but
negative correlation may not be
Potential mechanisms
Union members were discouraged and de‐
yp
motivated by peer information
Union members distrust messages sent to Union
members distrust messages sent to
them by the company
Possible mechanisms
Union non‐participants distrust messages y
p y
sent to them by the company
Problem: Why don’t union participants react the same way?
the same way?
Main results: Non‐union
Enrollment increases when peer info given
Enrollment increases with the participation rate in the comparison
participation rate in the comparison group
Main results: Union
Enrollment decreases when peer info given
info given
Enrollment decreases with the participation rate in the comparison
participation rate in the comparison group
Conclusion
Social norms marketing can backfire Social
norms marketing can backfire
for certain subgroups.
Main results
Union and non‐union participants
No significant peer info effect
Quick Enrollment
Q
Simplified enrollment mechanism
1. Check box on form
2. Return in pre‐addressed, postage‐
paid envelope
paid envelope
3. You will be enrolled at
– 6% before‐tax contribution rate
– Age
Age‐appropriate
appropriate target retirement fund
target retirement fund
Q
Quick
Enrollment effect at
another firm
Fraction E
Ever Participating
in Sa
avings Plan
n
50%
40%
30%
20%
10%
0%
0
3
6
9
12
15
18
21
24
27
Time Since Baseline (months)
Std. enrollment (2000)
Std. enrollment (2002)
Std. enrollment (2001)
30
33
Q
Quick
Enrollment effect at
another firm
Fraction E
Ever Participating
in Sa
avings Plan
n
50%
40%
30%
20%
10%
0%
0
3
6
9
12
15
18
21
24
27
30
Time Since Baseline (months)
Std. enrollment (2000)
Std. enrollment (2002)
Std. enrollment (2001)
Quick enrollment (2003)
33
Easy
y Escalation
Simplified way to raise contribution rate
1. Check box on form
2 Return in pre‐addressed, postage‐
2.
Return in pre addressed postage
paid envelope
3. Your contribution rate will be raised to 6%
raised to 6%
New rate <6%
New rate 6%
Date
New rate >6%
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Jun-04
Mar-04
Dec-03
Sep-03
Jun-03
Mar-03
F
Fraction
of participa
ants
witth contribution rate
e < 6%
Easy
y Escalation effect at
another firm
14%
12%
10%
8%
6%
4%
2%
0%
Sample
p characteristics
No peer
information
69.
Percent male
Panel A: Non-participants
U i
Union
Information
Information
about 5-yr.
about 10-yr.
age group
age group
66.0
61.6
No peer
information
77.2
Non-union
N
i
Information
about 5-yr.
age group
75.4
Information
about 10-yr.
age group
75.4
Age
Mean
Std. dev.
41.0
13.4
40.7
13.4
41.0
13.4
40.4
11.4
41.2
11.6
41.3
12.2
Tenure at
company (years)
Mean
Std. dev.
9.4
12.0
9.5
12.1
9.0
12.1
7.2
9.3
7.5
9.5
7.8
8.4
Annual salary
Mean
Std. dev.
36 6
36.6
17.7
36 2
36.2
16.2
36.9
36
9
19.9
44.6
44
6
21.6
45.2
45
2
22.8
43.0
43
0
20.8
N = 343
N = 347
N = 349
N = 136
N = 130
N = 134
Sample size
Sample
p characteristics
Panel B: Participants with low contribution rates
Union
Information
Information
No peer
about 5-yr.
about 10-yr.
No peer
information
age group
age group
information
61.3
51.8
52.0
67.7
Percent male
Non union
Non-union
Information
about 5-yr.
age group
67.6
Information
about 10-yr.
age group
69.5
Age
Mean
Std. dev.
39.9
39
9
11.7
40.8
40
8
11.8
41.1
41
1
11.9
41.8
41
8
10.6
42.0
42
0
10.7
42.0
42
0
10.5
Tenure at
company (years)
Mean
Std. dev.
11.4
10.1
10.6
9.8
10.5
10.6
10.7
10.2
10.5
9.6
11.1
9.9
Annual salary
(thousands of $)
Mean
Std. dev.
43.4
16.4
41.5
13.7
40.6
14.6
56.3
30.6
54.9
25.1
57.0
28.4
Before-tax cont.
rate
Mean
Std. dev.
2.5
1.8
2.5
1.8
2.6
1.8
1.9
1.7
1.8
1.8
1.8
1.8
Before-tax
balance
Mean
Std dev.
Std.
dev
18.0
29.6
29
6
16.8
26.4
26
4
17.4
32 8
32.8
33.2
61 8
61.8
29.1
53.9
53
9
31.5
55 1
55.1
N = 235
N = 255
N = 256
N = 931
N = 916
N = 911
Sample size