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Fatalism and Savings

  • Stephen, Wu
  • Joel, Shapiro

We examine the impact of fatalism, the belief that one has little or no control over future events, on the decision of whether or not to save. We develop a model that predicts that fatalism decreases savings for moderately risk averse individuals, increases savings for highly risk averse individuals, and otherwise has no impact. Furthermore, fatalism decreases effort in learning about savings and investment options. We use data from National Longitudinal Survey of Youth (NLSY) and find general support for the theoretical predictions of the model. The results are robust to the inclusion of a number of additional control variables.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24852.

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Date of creation: Jul 2010
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Handle: RePEc:pra:mprapa:24852
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  1. Paola Giuliano & Stephen Turnovsky, 2002. "Intertemporal Substitution, Risk Aversion, and Economic Performance in a Stochastically Growing Open Economy," Working Papers UWEC-2002-20-P, University of Washington, Department of Economics.
  2. Angeletos, George-Marios & Alesina, Alberto, 2005. "Fairness and Redistribution," Scholarly Articles 4553009, Harvard University Department of Economics.
  3. Reis, Ricardo, 2005. "Inattentive Consumers," CEPR Discussion Papers 5053, C.E.P.R. Discussion Papers.
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  6. Dohmen, Thomas & Falk, Armin & Huffman, David B. & Sunde, Uwe & Schupp, Jürgen & Wagner, Gert G., 2005. "Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey," IZA Discussion Papers 1730, Institute for the Study of Labor (IZA).
  7. Bernheim, B. Douglas & Garrett, Daniel M., 2003. "The effects of financial education in the workplace: evidence from a survey of households," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1487-1519, August.
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  10. Esther Duflo & Emmanuel Saez, 2003. "The Role Of Information And Social Interactions In Retirement Plan Decisions: Evidence From A Randomized Experiment," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 815-842, August.
  11. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
  12. Diamond, Peter & Koszegi, Botond, 2003. "Quasi-hyperbolic discounting and retirement," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1839-1872, September.
  13. David I. Laibson & Andrea Repetto & Jeremy Tobacman, 1998. "Self-Control and Saving for Retirement," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 91-196.
  14. Wu Stephen, 2005. "Fatalistic Tendencies: An Explanation of Why People Don't Save," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-23, September.
  15. Monica Paiella & Luigi Guiso, 2004. "Risk Aversion, Wealth and Background Risk," 2004 Meeting Papers 525, Society for Economic Dynamics.
  16. Emmanuel Saez & Esther Duflo, 2003. "The role of information and social interactions in retirement plan decisions: Evidence from a randomized experiment," Framed Field Experiments 00141, The Field Experiments Website.
  17. Raj Chetty, 2003. "A New Method of Estimating Risk Aversion," NBER Working Papers 9988, National Bureau of Economic Research, Inc.
  18. Wu, Stephen, 2003. "Sickness and preventive medical behavior," Journal of Health Economics, Elsevier, vol. 22(4), pages 675-689, July.
  19. Banks, James & Blundell, Richard & Tanner, Sarah, 1998. "Is There a Retirement-Savings Puzzle?," American Economic Review, American Economic Association, vol. 88(4), pages 769-88, September.
  20. Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
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