Credit Card Borrowing and the Monoamine Oxidase A (MAOA) Gene

Abstract:     
Economists have long realized the importance of credit markets and borrowing behavior for household finance and economics more generally. More recently, twin studies have shown that genetic variation plays a significant role in financial decision making. However, these studies have not identified which genes might be involved. Here we present the first evidence of a specific gene that may influence borrowing behavior. Using a discovery and replication sample from a U.S. representative data set (Add Health), we show that a functional polymorphism on the MAOA gene is associated with credit card borrowing behavior. For the combined sample of approximately 10,000 individuals we find that having one or both MAOA alleles of the less transcriptionally efficient type raises the average likelihood of reporting credit card debt by about 8%. These results suggest that behavioral models benefit from integrating genetic variation and that economists should consider the welfare consequences of possible discrimination by lenders on the basis of genotype.

Number of Pages in PDF File: 30

Keywords: Credit card borrowing, present-biased time preferences, MAOA gene, genetic association study

JEL Classification: D14, D91, G02

working papers series