Behavioral Inequality: The Contribution of Decision-making Frictions to Wealth Inequality

Decision-making challenges, such as limited self-control and limited cognition, influence many economic decisions, including investing, borrowing, and saving, and may contribute to increased economic inequality. If these challenges are important for distribution of wealth, ignoring them risks missing important causes of wealth inequality and relevant policy remedies. Behavioral economist Stefano DellaVigna will extent to which behavioral decision-making, such as failing to claim EITC benefits or to take advantage of an employer-matched retirement contribution, contributes to increased wealth inequality. He will analyze data from the Panel Study of Income Dynamics, the Survey of Consumer Finances, and the Survey of Income and Program Participation for his study.