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Fatalism and Savings

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  • Stephen, Wu
  • Joel, Shapiro

Abstract

We examine the impact of fatalism, the belief that one has little or no control over future events, on the decision of whether or not to save. We develop a model that predicts that fatalism decreases savings for moderately risk averse individuals, increases savings for highly risk averse individuals, and otherwise has no impact. Furthermore, fatalism decreases effort in learning about savings and investment options. We use data from National Longitudinal Survey of Youth (NLSY) and find general support for the theoretical predictions of the model. The results are robust to the inclusion of a number of additional control variables.

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  • Stephen, Wu & Joel, Shapiro, 2010. "Fatalism and Savings," MPRA Paper 24852, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:24852
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    References listed on IDEAS

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    17. Wu, Stephen, 2003. "Sickness and preventive medical behavior," Journal of Health Economics, Elsevier, vol. 22(4), pages 675-689, July.
    18. Wu Stephen, 2005. "Fatalistic Tendencies: An Explanation of Why People Don't Save," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-23, September.
    19. Robert B. Barsky & F. Thomas Juster & Miles S. Kimball & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 537-579.
    20. Reis, Ricardo, 2006. "Inattentive consumers," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1761-1800, November.
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    Cited by:

    1. Ruiu, Gabriele, 2012. "Is fatalism a cultural belief? An empirical analysis on the origin of fatalistic tendencies," MPRA Paper 41705, University Library of Munich, Germany.
    2. Camelia M. Kuhnen & Brian T. Melzer, 2018. "Noncognitive Abilities and Financial Delinquency: The Role of Self‐Efficacy in Avoiding Financial Distress," Journal of Finance, American Finance Association, vol. 73(6), pages 2837-2869, December.
    3. Nicholas W. Papageorge & Matthew V. Zahn & Michèle Belot & Eline Broek-Altenburg & Syngjoo Choi & Julian C. Jamison & Egon Tripodi, 2021. "Socio-demographic factors associated with self-protecting behavior during the Covid-19 pandemic," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(2), pages 691-738, April.
    4. Konstantin Matthies & Flavio Toxvaerd, 2023. "Rather doomed than uncertain: risk attitudes and transmissive behavior under asymptomatic infection," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(1), pages 1-44, July.
    5. Jesper Akesson & Sam Ashworth-Hayes & Robert Hahn & Robert Metcalfe & Itzhak Rasooly, 2022. "Fatalism, beliefs, and behaviors during the COVID-19 pandemic," Journal of Risk and Uncertainty, Springer, vol. 64(2), pages 147-190, April.
    6. Tamar CHKHAIDZE & Dimitri CHUBINIDZE & Elisabed GEGENAVA, 2019. "Fatalism €“ Georgian Cultural Model," Prizren Social Science Journal, SHIKS, vol. 3(3), pages 41-52, December.
    7. Ludek Kouba & Hans Pitlik, 2014. "I wanna live my life: Locus of Control and Support for the Welfare State," MENDELU Working Papers in Business and Economics 2014-46, Mendel University in Brno, Faculty of Business and Economics.

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    More about this item

    Keywords

    fatalism; savings; risk aversion;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • H00 - Public Economics - - General - - - General

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