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Locus of Control and Savings

  • Cobb-Clark, Deborah A.


    (University of Sydney)

  • Kassenboehmer, Sonja C.


    (Monash University)

  • Sinning, Mathias


    (Australian National University)

This paper analyzes the relationship between individuals' locus of control and their savings behavior, i.e. wealth accumulation, savings rates, and portfolio choices. Locus of control is a psychological concept that captures individuals' beliefs about the controllability of life events and is a key component of self-control. We find that households with an internal reference person save more both in terms of levels and as a percentage of their permanent incomes. Although the locus-of-control gap in savings rates is largest among rich households, the gap in wealth accumulation is particularly large for poor households. Finally, households with an internal reference person and average net worth hold significantly less financial wealth, but significantly more pension wealth, than otherwise similar households with an external reference person.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7837.

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Length: 48 pages
Date of creation: Dec 2013
Date of revision:
Publication status: published in: Journal of Banking and Finance, 2016, 73, 113-130
Handle: RePEc:iza:izadps:dp7837
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