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Daniel Reck
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Journal Articles
Publisher: Journals Gateway
The Review of Economics and Statistics (2022) 104 (1): 17–33.
Published: 04 January 2022
Abstract
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Default effects are pervasive, but the reason they arise is often unclear. We study optimal policy when the planner does not know whether an observed default effect reflects a welfare-relevant preference or a mistake. Within a broad class of models, we find that determining optimal policy is impossible without resolving this ambiguity. Depending on the resolution, optimal policy tends in opposite directions: either minimizing the number of nondefault choices or inducing active choice. We show how these considerations depend on whether active choosers make mistakes when selecting among nondefault options. We illustrate our results using data on pension contribution defaults.
Includes: Supplementary data
Journal Articles
Publisher: Journals Gateway
The Review of Economics and Statistics (2020) 102 (2): 339–354.
Published: 01 May 2020
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We estimate the impact of youth minimum wages on youth employment by exploiting a large discontinuity in Danish minimum wage rules at age 18, using monthly payroll records for the Danish population. The hourly wage jumps by 40% at the discontinuity. Employment falls by 33%, and total input of hours decreases by 45%, leaving the aggregate wage payment almost unchanged. We show theoretically how the discontinuity may be exploited to evaluate policy changes. The relevant elasticity for evaluating the effect on youth employment of changes in their minimum wage is in the range 0.6 to 1.1.
Includes: Supplementary data