Cormac O'Dea, Yale University

Efficiency in Household Decision Making: Large Evidence from the Retirement Savings of US Couples

Abstract

Pareto efficiency is a core assumption of most models of the household. We test this assumption using a new dataset covering the retirement saving contributions of 1.3 million U.S. couples. While a vast literature has failed to reject household efficiency in developed countries, we find evidence of widespread inefficiency in our setting: retirement contributions are not allocated to the account of the spouse with the highest employer match rate. This lack of coordination cannot be explained by inertia, auto-enrollment, or simple heuristics. Instead, we find that indicators of weaker marital commitment correlate with the incidence of inefficient allocations.

Cormac O’Dea is an Assistant Professor in Economics at Yale University. He is also a Research Fellow of the Institute for Fiscal Studies and a Faculty Research Fellow at the National Bureau of Economic Research. His research focuses on household saving, retirement, social insurance, and intergenerational links in outcomes. Prior to coming to Yale, he was a Research Economist and an Associate Director at the Institute for Fiscal Studies. He has a PhD in economics from University College London and before that studied at Cambridge University and Trinity College Dublin.

You can read more about Cormac O'Dea and his research here

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