Czech pension reform through the lens of behavioral economics

• Název práce v češtině: Česká důchodová reforma optikou behaviorální ekonomie
• Název v anglickém jazyce: Czech pension reform through the lens of behavioral economics
• Klíčová slova: česká důchodová reforma, behaviorální ekonomie, diskontování, sebekontrola, finanční gramotnost
• Klíčová slova anglicky: Czech pension reform, behavioral economics, time discounting, self-control, financial knowledge
• Akademický rok vypsání: 2010/2011
• Typ práce: diplomová práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: doc. PhDr. Michal Bauer, Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 01.03.2011
• Datum zadání: 08.06.2011
• Datum a čas obhajoby: 28.06.2012 00:00
• Místo konání obhajoby: IES
• Datum odevzdání elektronické podoby: 15.05.2012
• Datum proběhlé obhajoby: 28.06.2012
• Oponenti: doc. PhDr. Lubomír Cingl, Ph.D.

Seznam odborné literatury

Ariely, Dan; Wertenbroch, Klaus (2002) Procrastination, Deadlines and Performance: Self-control by Precommitment, Psychological Science 13(3), pp. 219-224

Ashraf, Nava; Karlan, Dean S.; Yin, Wesley (2006) Tying Odysseus to the mast: Evidence from commitment savings product in the Philippines, Quarterly Journal of Economics 121(2), 635-672

Cameron, A. Colin; Trivedi, Pravin K. (2005)Microeconomics: Methods and Applications, Cambridge University Press, ISBN 978-0-511-12581-2

de Meza, David; Irlenbusch, Bernd; Reyniers, Diane (2008) Financial capability: a behavioural economics perspective, Consumer research 69, The Financial Services Authority, London, UK

Lusardi, Annamaria (2008) Financial Literacy: An Essential Tool for Informed Consumer Choice?, NBER Working Paper No. 14084, JEL No. D14

Lusardi, Annamaria; Mitchell, Olivia (2007a) Baby Boomer Retirement Security: The Role of Planning, Financial Literacy, and Housing Wealth, Journal of Monetary Economics, 54, pp. 205–224

Lusardi, Annamaria; Mitchell, Olivia (2007b) Financial literacy and retirement preparedness: Evidence and implications for financial education, Business Economics 42(1), pp. 35-44

Thaler, Richard; Bernartzi, Shlomo (2004) Save More Tomorrow™: Using Behavioral Economics to Increase Employee Saving, The Journal of Political Economy, 112(1), S164

Thaler, Richard; Sunstein, Cass (2008) Nudge: Improving Decisions about Health, Wealth, and Happiness, Yale University Press, ISBN 978-0-14-311526-7

Předběžná náplň práce v anglickém jazyce

My thesis will concern the very actual issue of pension reforming. The current concept of the Pay-As-You-Go pension system seems to be unsustainable under the expected demographic evolvement. In order to maintain the level of living after retirement people will be supposed to become more interested in financial planning and to be more responsible for their retirement saving. Therefore, one of the objectives of pension reform is to be designed in favor of higher saving behavior. In the words of behavioral economists, it should nudge towards higher savings.

The main aim of my thesis will be to study some aspects of the Czech retirement saving behavior which could help to suggest improvements in the recent proposals for pension reform. In my research I will use the concepts of behavioral economics.
Firstly, there is a role of financial literacy. Ignorance about basic financial concepts can be linked to lack of retirement planning. As shown by Lusardi (2008), financial literacy matters for financial decision-making. Those who are more financially knowledgeable are more likely to have planned for retirement.
Secondly, other aspect impacting pension saving behavior are time-inconsistent preferences leading people to a limited self-control (e.g., Ariely, Wertenbroch, 2002). People with those preferences still postpone their actions regarding retirement saving.
The last but not least important aspect consists in a tendency of some people with time-inconsistent preferences to voluntarily impose constraints (costly to cancel) on their future choices in order to resist future temptations and ensure the desirable actions (e.g., Ariely, Wertenbroch, 2002).
If we know how these aspects of people’s behavior are related, we will be able to formulate recommendations for a financial education program or a design of the pension reform plans.

In order to obtain the microeconomic data for my thesis I’m going to conduct a questionnaire survey. However I’m aware of limitations of the survey method, it would be very costly and beyond my possibilities to conduct a field experiment which would reflect more realistic decision-making.
For my survey I will design a questionnaire consisting of two parts. The first part will ask about respondents’ characteristics like age, sex, education and information on up-to-date retirement saving. It will also try to examine respondents’ level of financial literacy and time consistency of their preferences. My measurement of financial literacy will be inspired by Lusardi, Mitchell (2007b) who devised a financial literacy survey supposing that a score in answering financial literacy questions is highly correlated with financial capability of respondents. I will also design a short financial literacy quiz approximating the level of financial knowledge. In order to reveal time consistency of individual preferences I will inspire by Ashraf et al (2006) who designed hypothetical time discounting questions for this purpose.
In the second part, three or four variations of the current pension saving plan will be offered to respondents. The respondents will be asked to range the pension programs from the best to the worst according to their personal preferences. The programs will differ in commitment conditions and determination of the contribution rate. These aspects reflecting behavioral characteristics were discussed by Ashraf et al (2006) and Thaler, Bernatzi (2004).

I will try to collect as large and diverse data sample as possible.