Revealing Economic Behaviour - Register Based Experiment (Revealing Economic Behaviour)

Abstract:

An important advance in economic theory has been the formulation of the life-cycle model, which is a unified model of consumption, savings and investment decisions over the lifetime of the decision maker. We propose using a combination of natural experiments to examine predictions of the lifecycle model and controlled field experiments to characterize the underlying preference structure of the model. The model makes some stark predictions about naturally occurring behavior, and field experiments allow us to identify what aspects of the theory require relaxation in order to explain economic behavior in naturally occurring environments. Our research strategy is to use register data to recruit specific groups for experiments. Register based experimentation is necessary, simply because the group of interest is a small part of the population and these individuals are not easily identified through questionnaires of the general population. Knowledge about individual savings and investment behavior has importance for policies that influence the allocation of resources over time.One immediate policy example involves the debate about pension systems. At a time when the Danish government is revising the state system of pensions, it is crucial that policy makers have a clear understanding of individual preferences over delays in receiving economic gains, as these interact with the state policy to produce the actual outcome, which can then be assessed in terms of its social welfare.