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Future Orientedness

Author

Listed:
  • John Knowles

    (Simon Fraser University)

  • Andrew Postlewaite

    (University of Pennsylvania)

Abstract

We develop an index of "future orientedness" based on how an individual’s attitudes to planning for the future, reported in the PSID in the 1970s, predict the growth rate of household wealth many years later. Our results suggest that variation in future orientedness is more about effective planning than about discounting the future. Wives appear to have much less influence than husbands over household savings but transmit future orientedness to offspring more reliably. Variation in future orientedness is distinct from financial sophistication or opportunity, as it also helps to predict non-financial choices, such as smoking, health and the timing of children. Simulation of the cumulative effects over the lifetime suggests that variation in future orientedness increases inequality of wealth at retirement, boosting the Gini coefficient by 10-20%.

Suggested Citation

  • John Knowles & Andrew Postlewaite, 2023. "Future Orientedness," PIER Working Paper Archive 23-019, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:23-019
    as

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    File URL: https://economics.sas.upenn.edu/system/files/working-papers/23-0019%20PIER%20Paper%20Submission.pdf
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    More about this item

    Keywords

    Family Economics; Inequality; Household Formation; Household Economics;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D19 - Microeconomics - - Household Behavior - - - Other
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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