In this seminar Akshay Shanker will provide an overview of his recent paper, Superannuation Defaults and Voluntary Contributions. The paper considers how individual voluntary superannuation contribution behavior responds to changes in default contribution rates.

The Akshay shows that if agents are rational in the sense that they have an objective optimal savings function, then both the probability of someone making a voluntary contribution and the expected value of the voluntary contributions should be decreasing in default rates. This is the case even if the individual procrastinates. Akshay’s empirical analysis uses data from a major Australian superannuation fund, which has members on higher and lower default rates. Akshay finds that individuals are no less likely to make voluntary contributions on the higher default and after controlling for unobserved covariates by examining individuals who move between the two groups and he finds no evidence of reduced contributions. Akshay concludes that possible explanations for the data analyzed here must consider how the default could either affect individual evaluations of optimal savings (anchoring bias) or reject the usefulness of any independent optimal savings share in influencing savings decisions.

Akshay is a second year economics PhD student at the Australian National University. His research interests include growth theory and technological development.

The CAMA Macroeconomics Brown Bag Seminars offer CAMA speakers, in particular PhD students, an opportunity to present their work in progress in front of their peers, and reputable visitors to showcase their work.