Abstract

This paper uses Swedish administrative data to examine the impact of grandparenthood on retirement behaviour. For causal identification, I exploit conditionally random variation in the births of first grandchildren using an event study design. The results show a significant increase in the retirement probability for grandmothers and grandfathers when the first grandchild is born, with no significant differences between them. The effects of the arrival of the grandchild on retirement increase over time after the grandchild is born. The incremental effects are larger among grandparents in the upper half of the earnings distribution than among their counterparts. The findings suggest that grandparenthood makes grandfathers and grandmothers less elastic to financial incentives and other regulations that also promote longer working lives also in a country with generous family policies such as Sweden.

Abstract

We show that, after the revelation of financial fraud in a major pension fund manager, two-thirds of affected investors fail to divest. Inert investors are on average younger, of lower SES and more influenced by default options. The majority of those who divest move their money to the only state-run option on the fund menu. The revelation of fraud also induces a small movement of investors from non-fraudulent private investment funds to the state alternative. We further show that most fraud victims end up in underperforming high-fee funds through their prior affiliation with a subscription-based financial advisor. Our analysis is based on the remarkable events surrounding the expulsion of Allra from the Swedish Premium Pension, and administrative, individual-level data on mutual fund choices and background characteristics. Our results illustrate that fraudulent fund managers may exploit widespread consumer biases in choice-oriented pension plans, and that information interventions by the government are important but far from fully effective in nudging victimized investors to take the right action. Pension plans may be characterized by investor inertia even under extreme circumstances such as fraud.

Abstract

How did investors in the Swedish Premium Pension System (PPS) react to the stock markets shock ignited in 2020 by the COVID-19 pandemic? The share of investors that traded more than doubled, and trades shifted capital from equity funds to low risk interest funds. In economic terms, however, trading activity stayed at very low levels—less than two percent of investors traded in March 2020 and there was no effect on pension withdrawals. Given the vast evidence on retail investors’ strongly increasing trading volume in crisis times, the reaction of PPS investors looks surprisingly smart, i.e., avoiding the many mistakes that investors incur when they try to outsmart the market. Potentially, the often-criticized choice architecture of the PPS that induces strong inertia provided positive side effects in times of a severe market shock.

Abstract

Using data from the Tanzania National Panel Survey (TZNPS), this paper provides new evidence on the state of social exclusion in Tanzania. Using both descriptive and econometric analyses, results show that, social exclusion in Tanzania is relatively high. Over the period of study, about 98% of the sample have experienced social exclusion at least once over the entire period. It’s only about 4% of the population under study that has never experienced social exclusion over the period under study. Regardless of this high proportions of individuals experiencing social exclusion, results also show that not all individuals are excluded through their entire period. This suggests that, there is some degree of movement between individuals who become socially excluded and those who move out of social exclusion in Tanzania. Results suggest that social exclusion dynamics in Tanzania is to a large extent triggered by observed characteristics (economic adversities) as compared to unobserved heterogeneity. These results can help to formulate and improve policies which are directed toward poverty reduction and social exclusion. In particular, it can assist in the process of proposing policies which will both help to get people out of social exclusion or prevent people from being socially excluded.

Abstract

This paper examines the role of cognitive ability in protecting individuals from financial fraud. We analyze fraud that targets retirement savings in the Swedish public pension system, where several fund companies were expelled for misconduct. Some of these firms then faced criminal investi- gations that led to prison sentences. Investors in these fraudulent funds experienced both direct losses from the failure to recover misappropriated funds and indirect losses due to poor fund performance and high fees. Using administrative data on fund selections in the Swedish pension system, linked with cognitive ability test scores from military enlistment, we find a nearly linear, strongly negative relationship between cognitive ability and the likelihood of investing in these fraudulent firms. Verbal skills, in particular, play a critical role in protecting savers from fraud, and we ensure that our results are not confounded by a general propensity of low-ability individuals to end up in poorer-performing funds.

Abstract

This paper uses individual-level data on fund choices in the mandatory Swedish Premium Pension System (PPS) to analyse how investors respond to information about their pension savings. The Swedish Pensions Agency mails an annual information letter, the Orange Envelope, to all investors to provide tailored information about their public pension accounts. To examine the effect of this pension communication, I exploit the staggered roll-out of the information letters across different Swedish counties. The results show that the letters significantly increase investors’ trading activity in the PPS. Still, the letters’ economic relevance is limited due to low general engagement among the savers – however, those who respond to the letters by reallocating their portfolios benefit by having better portfolio performance and lower fees the upcoming years. The effect is driven by active investors with higher cognitive abilities who adjust their portfolios by divesting from low-performing funds. These findings suggest that providing communication about pensions has smaller effects on less engaged individuals, and unresponsive investors are vulnerable to worse pension investments.