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The Origins of Savings Behavior

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  • Henrik Cronqvist
  • Stephan Siegel

Abstract

Analyzing the savings behavior of a large sample of identical and fraternal twins, we find that genetic differences explain about 33 percent of the variation in savings propensities across individuals. Individuals are born with a persistent genetic predisposition to a specific savings behavior. Parenting contributes to the variation in savings rates among younger individuals, but its effect decays over time. The environment when growing up (e.g., parents' wealth) moderates genetic effects. Finally, savings behavior is genetically correlated with income growth, smoking, and obesity, suggesting that the genetic component of savings behavior reflects genetic variation in time preferences or self-control.

Suggested Citation

  • Henrik Cronqvist & Stephan Siegel, 2015. "The Origins of Savings Behavior," Journal of Political Economy, University of Chicago Press, vol. 123(1), pages 123-169.
  • Handle: RePEc:ucp:jpolec:doi:10.1086/679284
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    1. repec:eee:jeborg:v:142:y:2017:i:c:p:404-424 is not listed on IDEAS
    2. Oleg Chuprinin & Denis Sosyura, 2016. "Family Descent as a Signal of Managerial Quality: Evidence from Mutual Funds," NBER Working Papers 22517, National Bureau of Economic Research, Inc.
    3. repec:spr:empeco:v:52:y:2017:i:4:d:10.1007_s00181-016-1120-6 is not listed on IDEAS
    4. Paolo Masella & Hannah Paule-Paludkiewicz & Nicola Fuchs-Schündeln, 2017. "Cultural Determinants of Household Saving Behavior," 2017 Meeting Papers 1052, Society for Economic Dynamics.
    5. Kuhnen, Camelia M. & Miu, Andrei C., 2017. "Socioeconomic status and learning from financial information," Journal of Financial Economics, Elsevier, pages 349-372.
    6. Ilan Noy & Eduardo A. Cavallo & Oscar Becerra, 2015. "The Mystery of Saving in Latin America," IDB Publications (Working Papers) 7311, Inter-American Development Bank.
    7. Black, Sandra E. & Devereux, Paul J. & Salvanes, Kjell G., 2016. "Healthy(?), wealthy, and wise: Birth order and adult health," Economics & Human Biology, Elsevier, vol. 23(C), pages 27-45.
    8. Strulik, Holger, 2016. "Myopic misery: Maternal depression, child investments, and the neurobiological poverty trap," Center for European, Governance and Economic Development Research Discussion Papers 294, University of Goettingen, Department of Economics.
    9. William DUPONT IV & Ilan NOY & OKUYAMA Yoko & SAWADA Yasuyuki, 2015. "The Long-Run Socio-Economic Consequences of a Large Disaster: The 1995 earthquake in Kobe," Discussion papers 15035, Research Institute of Economy, Trade and Industry (RIETI).
    10. E. Black , Sandra & Devereux, Paul & Lundborg, Petter & Majlesi, Kaveh, 2015. "Poor Little Rich Kids? The Determinants of the Intergenerational Transmission of Wealth," Knut Wicksell Working Paper Series 2015/6, Lund University, Knut Wicksell Centre for Financial Studies.
    11. Brounen, Dirk & Koedijk, Kees G. & Pownall, Rachel A.J., 2016. "Household financial planning and savings behavior," Journal of International Money and Finance, Elsevier, pages 95-107.
    12. Hübler, Philipp, 2017. "Heritability of time preference: Evidence from German twin data," MPRA Paper 77620, University Library of Munich, Germany.
    13. Paule-Paludkiewicz, Hannah & Fuchs-Schündeln, Nicola & Masella, Paolo, 2016. "Cultural Determinants of Household Saving Behavior," Annual Conference 2016 (Augsburg): Demographic Change 145854, Verein für Socialpolitik / German Economic Association.
    14. Brounen, Dirk & Koedijk, Kees G. & Pownall, Rachel A.J., 2016. "Household financial planning and savings behavior," Journal of International Money and Finance, Elsevier, pages 95-107.
    15. Andreas Fagereng & Magne Mogstad & Marte Rønning, 2015. "Why do wealthy parents have wealthy children?," Discussion Papers 813, Statistics Norway, Research Department.
    16. Daniel Gray & Alberto Montagnoli & Mirko Moro, 2017. "Does education improve financial outcomes? Quasi-experimental evidence from Britain," Working Papers 2017010, The University of Sheffield, Department of Economics.
    17. Joshua Aizenman & Eduardo Cavallo & Ilan Noy, 2015. "Precautionary Strategies and Household Saving," Open Economies Review, Springer, pages 911-939.
    18. David Cesarini & Magnus Johannesson & Patrik K. E. Magnusson & Björn Wallace, 2012. "The Behavioral Genetics of Behavioral Anomalies," Management Science, INFORMS, pages 21-34.
    19. Brown, Sarah & Taylor, Karl, 2016. "Early influences on saving behaviour: Analysis of British panel data," Journal of Banking & Finance, Elsevier, vol. 62(C), pages 1-14.
    20. Philipp Huebler, 2017. "Heritability of time preference: Evidence from German twin data," Discussion Paper Series 334, Universitaet Augsburg, Institute for Economics.
    21. Fan, Ying & Yavas, Abdullah, 2017. "How Does Mortgage Debt Affect Household Consumption? Micro Evidence from China," MPRA Paper 79306, University Library of Munich, Germany.
    22. Carin van der Cruijsen & Jakob de Haan & David-Jan Jansen & Robert Mosch, 2011. "Household savings behaviour in crisis times," DNB Working Papers 315, Netherlands Central Bank, Research Department.

    More about this item

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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