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Locus of Control and Savings

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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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  • Deborah A. Cobb-Clark & Sonja C. Kassenboehmer & Mathias G. Sinning, 2014. "Locus of Control and Savings," Discussion Papers Series 498, School of Economics, University of Queensland, Australia.
  • Handle: RePEc:qld:uq2004:498
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    Cited by:

    1. Deborah Cobb-Clark, 2015. "Locus of control and the labor market," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-19, December.
    2. Ayllón, Sara & Fusco, Alessio, 2017. "Are income poverty and perceptions of financial difficulties dynamically interrelated?," Journal of Economic Psychology, Elsevier, vol. 61(C), pages 103-114.
    3. Warn N. Lekfuangfu & Nattavudh Powdthavee & Nele Warrinnier & Francesca Cornaglia, 2018. "Locus of Control and its Intergenerational Implications for Early Childhood Skill Formation," Economic Journal, Royal Economic Society, vol. 128(608), pages 298-329, February.
    4. Milena Nikolova & Boris Nikolaev, 2017. "Does Joining the EU Make You Happy? Evidence from Bulgaria and Romania," Journal of Happiness Studies, Springer, vol. 18(6), pages 1593-1623, December.
    5. Buddelmeyer, Hielke & Powdthavee, Nattavudh, 2016. "Can having internal locus of control insure against negative shocks? Psychological evidence from panel data," Journal of Economic Behavior & Organization, Elsevier, vol. 122(C), pages 88-109.
    6. repec:eee:jeborg:v:148:y:2018:i:c:p:66-82 is not listed on IDEAS
    7. Malte Preuss & Juliane Hennecke, 2017. "Biased by Success and Failure: How Unemployment Shapes Stated Locus of Control," SOEPpapers on Multidisciplinary Panel Data Research 943, DIW Berlin, The German Socio-Economic Panel (SOEP).
    8. Sonja C. Kassenboehmer & Sonja G. Schatz, 2014. "Re-employment Expectations and the Eye of Providence," SOEPpapers on Multidisciplinary Panel Data Research 697, DIW Berlin, The German Socio-Economic Panel (SOEP).
    9. Caliendo, Marco & Cobb-Clark, Deborah A. & Seitz, Helke & Uhlendorff, Arne, 2016. "Locus of Control and Investment in Training," IZA Discussion Papers 10406, Institute for the Study of Labor (IZA).
    10. Elkins, Rosemary & Schurer, Stefanie, 2018. "Exploring the Role of Fathers in Non-Cognitive Skill Development over the Lifecourse," IZA Discussion Papers 11451, Institute for the Study of Labor (IZA).
    11. Mosca, Irene & McCrory, Cathal, 2016. "Personality and wealth accumulation among older couples: Do dispositional characteristics pay dividends?," Journal of Economic Psychology, Elsevier, vol. 56(C), pages 1-19.
    12. Rosemary Elkins & Stefanie Schurer, 2018. "Exploring the role of fathers in non-cognitive skill development over the lifecourse," Working Papers 2018-034, Human Capital and Economic Opportunity Working Group.
    13. Luik, Marc-André & Steinhardt, Max Friedrich, 2016. "Immigrant-native differences in stockholding – The role of cognitive and non-cognitive skills," Journal of Empirical Finance, Elsevier, vol. 38(PA), pages 103-119.
    14. repec:eee:jeborg:v:143:y:2017:i:c:p:98-115 is not listed on IDEAS
    15. Kassenboehmer, Sonja C. & Schatz, Sonja G., 2017. "Re-employment expectations and realisations: Prediction errors and behavioural responses," Labour Economics, Elsevier, vol. 44(C), pages 161-176.
    16. repec:eee:ecmode:v:72:y:2018:i:c:p:122-131 is not listed on IDEAS
    17. Johnston, David W. & Kassenboehmer, Sonja C. & Shields, Michael A., 2016. "Financial decision-making in the household: Exploring the importance of survey respondent, health, cognitive ability and personality," Journal of Economic Behavior & Organization, Elsevier, vol. 132(PA), pages 42-61.
    18. Nikolaev, Boris & Bennett, Daniel L., 2016. "Give me liberty and give me control: Economic freedom, control perceptions and the paradox of choice," European Journal of Political Economy, Elsevier, vol. 45(S), pages 39-52.

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    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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