Jonas Mueller-Gastell

Working Paper, December 2020

We examine the desirability of opt-out minimization, a well-known and simple rule of thumb for setting default options such as passively selected contribution rates in employee-directed pension plans. Existing results suggest that this strategy is welfare-optimal only under highly restrictive assumptions. In this paper, we dispense with those assumptions and demonstrate far more generally that opt-out minimization is approximately optimal. Our main results require only a small number of weak regularity conditions. We also conduct simulations to evaluate the accuracy of the approximation, as well as the robustness of our conclusions with respect to additional dimensions of heterogeneity. We conclude that opt-out minimization is not only practical, but also has a solid and general normative foundation.

Research Fields : 
Aging and retirement
Behavioral Economics
Behavioral Public Economics
Behavioral Welfare Economics
Household finance
Microeconomic Theory
Psychology of Choice
Public Economics
Taxation, Budgets & Deficits