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Locus of Control, Savings and Propensity to Save

Author

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  • Bucciol, Alessandro

    (University of Verona, Department of Economics)

  • Trucchi, Serena

    (Cardiff Business School)

Abstract

We study the relationship between saving choices and a key psychological characteristic such as locus of control using data from a longitudinal survey representative of the Dutch population. Locus of control measures the extent to which individuals perceive their life outcomes to be determined by their own actions, as opposed to external factors. Our findings show that those who believe to be in control of future outcomes save more, both at the extensive (probability to save) and intensive margins (amount of savings). We also investigate the mechanisms behind the relationship. Locus of control may affect both the propensity to save for general purposes and savings to achieve a specific purchase goal (e.g. buying a house). We find that both channels are significant, the latter being more sizeable.

Suggested Citation

  • Bucciol, Alessandro & Trucchi, Serena, 2020. "Locus of Control, Savings and Propensity to Save," Cardiff Economics Working Papers E2020/10, Cardiff University, Cardiff Business School, Economics Section.
    • Handle: RePEc:cdf:wpaper:2020/10
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    Keywords

    Locus of Control; Saving decisions; Propensity to save; Mediation analysis.;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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