The Origins of Savings Behavior
Claremont McKenna College - Robert Day School of Economics and Finance
University of Washington - Michael G. Foster School of Business
January 23, 2011
AFA 2011 Denver Meetings Paper
Analyzing identical and fraternal twins matched with data on their savings propensities, we find that genetic variation explains about 33 percent of the variation in savings behavior across individuals. Parenting effects on savings behavior are strong for those in their twenties but decay to zero by middle age, i.e., parents do not have a lifelong non-genetic impact on their children's savings. The family environment when growing up and an individual's socioeconomic status later in life moderate genetic effects, so that more supportive environments result in a stronger genetic expression of savings behavior. We also find that savings behavior is genetically correlated with income growth, smoking, and body mass index, suggesting that the genetic component of savings behavior reflects innate time preferences and lack of self-control. In a world moving towards individual retirement savings autonomy, understanding the deeper origins of individuals' savings behavior is becoming increasingly important.
Number of Pages in PDF File: 47
Keywords: Savings, Consumption, Behavioral Geneticsworking papers series
Date posted: July 28, 2010 ; Last revised: August 2, 2012
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