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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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    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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