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The Origins of Savings Behavior

Author

Listed:
  • Cronqvist, Henrik

    () (Claremont McKenna College)

  • Siegel, Stephan

    () (University of Washington)

Abstract

What are the origins of individual savings behavior? Using data on identical and fraternal twins matched with data on their savings behavior, we find that an individual's savings propensity is governed by both genetic predispositions, social transmission from parents to their children, and gene-environment interplay where certain environments moderate genetic influences. Genetic variation explains about 35 percent of the variation in savings rates across individuals, and this genetic effect is stronger in less constraining, high socioeconomic status environments. Parent-child transmission influences savings for young individuals and those who grew up in a family environment with less competition for parental resources. Individual-specific life experiences is a very important explanation for behavior in the savings domain, and strongest in urban communities. In a world progressing rapidly towards individual retirement savings autonomy, understanding the origins of individuals' savings behavior are of key importance to economists as well as policy makers.

Suggested Citation

  • Cronqvist, Henrik & Siegel, Stephan, 2010. "The Origins of Savings Behavior," SIFR Research Report Series 73, Institute for Financial Research.
  • Handle: RePEc:hhs:sifrwp:0073
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. What makes people save?
      by Economic Logician in Economic Logic on 2010-10-06 02:38:00
    2. Genetic Factors in Savings Behavior
      by dvollrath in The Growth Economics Blog on 2015-03-09 03:26:00

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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. Jason Collins & Boris Baer & Ernst Juerg Weber, 2016. "Evolutionary Biology in Economics: A Review," The Economic Record, The Economic Society of Australia, vol. 92(297), pages 291-312, June.
    6. Kuhnen, Camelia M. & Miu, Andrei C., 2017. "Socioeconomic status and learning from financial information," Journal of Financial Economics, Elsevier, vol. 124(2), pages 349-372.
    7. Ilan Noy & Eduardo A. Cavallo & Oscar Becerra, 2015. "The Mystery of Saving in Latin America," IDB Publications (Working Papers) 7311, Inter-American Development Bank.
    8. Black, Sandra E. & Devereux, Paul J. & Lundborg, Petter & Majlesi, Kaveh, 2015. "Poor Little Rich Kids? The Determinants of the Intergenerational Transmission of Wealth," IZA Discussion Papers 9227, Institute for the Study of Labor (IZA).
    9. 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.
    10. Joshua Aizenman & Eduardo Cavallo & Ilan Noy, 2015. "Precautionary Strategies and Household Saving," Open Economies Review, Springer, vol. 26(5), pages 911-939, November.
    11. Brounen, Dirk & Koedijk, Kees G. & Pownall, Rachel A.J., 2016. "Household financial planning and savings behavior," Journal of International Money and Finance, Elsevier, vol. 69(C), 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. Andreas Fagereng & Magne Mogstad & Marte Rønning, 2015. "Why do wealthy parents have wealthy children?," Discussion Papers 813, Statistics Norway, Research Department.
    15. 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.
    16. David Cesarini & Magnus Johannesson & Patrik K. E. Magnusson & Björn Wallace, 2012. "The Behavioral Genetics of Behavioral Anomalies," Management Science, INFORMS, vol. 58(1), pages 21-34, January.
    17. 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.
    18. Philipp Huebler, 2017. "Heritability of time preference: Evidence from German twin data," Discussion Paper Series 334, Universitaet Augsburg, Institute for Economics.
    19. Fan, Ying & Yavas, Abdullah, 2017. "How Does Mortgage Debt Affect Household Consumption? Micro Evidence from China," MPRA Paper 79306, University Library of Munich, Germany.
    20. 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

    Keywords

    Savings; Consumption; Behavioral Genetics;

    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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