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Fatalism and savings

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  • Shapiro, Joel
  • Wu, Stephen

Abstract

An individual’s decision about how much to save depends on her perception of how current savings affects future well-being. Fatalistic individuals believe that they have little or no control over future outcomes. We develop a theoretical model linking fatalism to savings and test the predictions using data from the National Longitudinal Survey of Youth (NLSY). The model predicts that fatalism decreases savings for moderately risk averse individuals, but actually increases savings for highly risk averse individuals. Furthermore, fatalism decreases effort in learning about savings and investment options. The empirical results support the theoretical predictions of the model and are robust to the inclusion of a number of additional control variables.

Suggested Citation

  • Shapiro, Joel & Wu, Stephen, 2011. "Fatalism and savings," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(5), pages 645-651.
  • Handle: RePEc:eee:soceco:v:40:y:2011:i:5:p:645-651
    DOI: 10.1016/j.socec.2011.05.003
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    References listed on IDEAS

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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, 2017. "Non-Cognitive Abilities and Financial Delinquency: The Role of Self-Efficacy in Avoiding Financial Distress," NBER Working Papers 23028, National Bureau of Economic Research, Inc.
    3. 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.

    More about this item

    Keywords

    Fatalism; Saving; Risk aversion;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D1 - Microeconomics - - Household Behavior
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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