BEHAVIORAL ECONOMICS AND RETIREMENT FINANCING IN ASIA
Asher, M., National University of Singapore, Singapore
In recent years, insight from behavioral economics, which incorporates observed behavior of homo sapiens into the analytical framework, has been increasingly applied to a wide range of issues. This framework which borrows from psychology and other disciplines has challenged many of the explanations of human behavior based on the traditional concepts of economic rationality. This paper analyses the relevance of such insight for retirement financing in Asia. Rapid individual and population ageing have made achieving adequate security in old age among the major challenges facing Asia. Two questions of particular relevance for retirement financing in Asia are the following. First, to what extent are mandatory saving schemes for retirement prevalent in many Asian countries consistent with behavioral economics? Second, what factors explain the investment behavior of households in Asia favoring short-run and speculative investments over long-term investments. The paper concludes with suggestions for enhancing retirement income security in Asia.