Efficiency in Household Decision Making: Evidence from the Retirement Savings of U.S. Couples
From Taha Choukhmane, Lucas Goodman and Cormac O'Dea
Pareto Efficiency is a core assumption of most models of household decision-making. We test this assumption using a new dataset covering the retirement saving contributions of over a million U.S. individuals. 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.
![Taha Choukhmane](/sites/default/files/styles/profile_detail_headshot/public/profile-images/2024/06/24/profile-image-189966.jpeg?h=7f412c8f&itok=B_l4ARMw)
Featured Publication
Choukhmane, Taha, Lucas Goodman, and Cormac O’Dea, MIT Sloan Working Paper 6139-20. Cambridge, MA: MIT Sloan School of Management, April 2023. NBER Working Paper 31195.