Stephen, Wu and Joel, Shapiro (2010): Fatalism and Savings.
Download (165Kb) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Fatalism and Savings|
|Keywords:||fatalism, savings, risk aversion|
|Subjects:||D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D80 - General
H - Public Economics > H0 - General > H00 - General
|Depositing User:||Stephen Wu|
|Date Deposited:||10. Sep 2010 15:55|
|Last Modified:||13. Feb 2013 05:31|
Alesina, Alberto and George Marios Angeletos, “Fairness and Redistribution,” American Economic Review 95(3): 960-980.
Allen, Todd W. and Christopher D. Carroll, 2001, “Individual Learning about Consumption,” Macroeconomic Dynamics 5(2): 255-71
Banks, James, Richard Blundell and Sarah Tanner, 1998, “Is there a Retirement Savings Puzzle?” American Economic Review 88(4): 769-788.
Barsky, Robert B., Juster, F. Thomas, Kimball, Miles S. and Matthew D. Shapiro, 1997, “Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study” The Quarterly Journal of Economics, Vol. 112, No. 2, pp. 537-579.
Benabou, Roland and Jean Tirole, 2006, “Belief in a Just World and Redistributive Politics,” Quarterly Journal of Economics, 121(2), May 2006, 699-746.
Bernheim, B. Douglas and Daniel M. Garrett, 2003, “The Effects of Financial Education in the Workplace: Evidence from a Survey of Households, ”Journal of Public Economics 87(7): 1487-1519.
Chetty, Raj, 2006, “A New Method of Estimating Risk Aversion,”American Economic Review 96(5): 1821-1834.
Choi, James J., David Laibson, and Brigitte Madrian, 2004, “Plan Design and 401k Savings Outcomes,” National Tax Journal 57: 275-298.
Diamond, Peter and Botond Koszegi, 2003, “Quasi-Hyperbolic Discounting and Retirement,” Journal of Public Economics 87(9): 1839-1872.
Dohmen, Thomas J., Armin Falk, David Huffman, Jurgen Schupp, Uwe Sunde, and Gert GeorgWagner, 2005, “Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey,” CEPR Discussion Paper 5517.
Duflo, Esther and Emmanuel Saez, 2003, “The Role of Information and Social Interactions in Retirement Plan Decisions: Evidence from a Randomized Experiment,” Quarterly Journal of Economics 118(3): 815-842.
Giuliano, Paola and Stephen Turnovsky, 2003, “Intertemporal Substitution, Risk Aversion, and Economic Performance in a Stochastically Growing Open Economy,” Journal of International Money and Finance, 22, 529-556.
Goodwin, Robin and Peter Allen, 2000, “Democracy and Fatalism in the Former Soviet Union,” Journal of Applied Social Psychology 30(12): 2558-2574.
Guiso, Luigi and Monica Paiella, 2008, “Risk Aversion, Wealth, and Background Risk”, Journal of the European Economic Association 6(6):1109—1150.
Gustman, Alan L. and Thomas L. Steinmeier, 2005, “Imperfect Knowledge of Social Security and Pensions,” Industrial Relations 44(2): 373-397.
Kash, K.M. and Dabney, M.K., 2001, “Psychological Aspects of Cancer Screening in High-Risk Populations,” Medical and Pediatric Oncology 36(5): 519-524.
Kimball, Miles and Tyler Shumway, 2009, “Fatalism, Locus of Control and Retirement Saving,” University of Michigan, mimeo.
Laibson, David, Andrea Repetto, and Jeremy Tobacman, 1998, “Self-Control and Saving for Retirement,” Brookings Papers on Economic Activity, 91-196.
Lerner, Melvin J., 1982, The Belief in a Just World: A Fundamental Delusion. New York, NY: Plenum Press.
Lusardi, Annamaria. “Explaining Why So Many Households Do Not Save.”Working Paper, Center for Retirement Research, Boston College, September 2001.
Madrian, Brigitte C. and Dennis F. Shea, 2001, “The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior,” Quarterly Journal of Economics 116(4): 1149-1187.
McClure, John, Michael W. Allen and FrankWalkey, 2001, “Countering Fatalism: Causal Information in News Reports,” Basic and Applied Social Psychology 23(2)” 109-121.
Reis, Ricardo, 2006, “Inattentive Consumers,” Journal of Monetary Economics 53(8): 1761-1800.
Wu, Stephen, 2003, “Sickness and Preventive Medical Behavior,” Journal of Health Economics 22(4): 675-689.
Wu, Stephen, 2005, “Fatalistic Tendencies: An Explanation of Why People Don’t Save,” Contributions to Economic Analysis and Policy 4(1): Article 11, 1-21.