| Abstract: |
Governments increasingly encourage socially desirable behavior with
probabilistic incentives. We study such “Pigouvian lotteries” in a
retirement-savings field experiment with 387, 000 workers in Colombia’s public
pension system. The lotteries induce sharp bunching at qualification
thresholds, but workers mostly meet them by retiming rather than increasing
deposits, leaving overall savings largely unaffected. Lotteries further crowd
out valuable life and disability insurance and disproportionately reward
wealthier savers. A welfare analysis shows that, once we account for these
unintended consequences, lotteries reduce welfare. Our findings illustrate
that behavioral spillovers across time and choice domains can reverse the
verdict on behavioral public policies. |