Locus of Control and Savings

48 Pages Posted: 13 Dec 2013

See all articles by Deborah A. Cobb-Clark

Deborah A. Cobb-Clark

School of Economics, University of Sydney; IZA Institute of Labor Economics

Sonja C. Kassenboehmer

Monash University - Centre for Health Economics

Mathias Sinning

Australian National University (ANU) - Crawford School of Public Policy

Multiple version iconThere are 3 versions of this paper

Date Written: December 1, 2013

Abstract

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.

Keywords: Non-cognitive skills, locus of control, wealth accumulation, asset portfolios, savings

JEL Classification: G02, G11, I31, R21

Suggested Citation

Cobb-Clark, Deborah A. and Kassenboehmer, Sonja C. and Sinning, Mathias, Locus of Control and Savings (December 1, 2013). Melbourne Institute Working Paper No. 42/13. Available at SSRN: https://ssrn.com/abstract=2366519 or http://dx.doi.org/10.2139/ssrn.2366519

Deborah A. Cobb-Clark

School of Economics, University of Sydney ( email )

606 Social Sciences Bldg. (A02)
The University of Sydney
Sydney, NSW 2006
Australia
61435061387 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Sonja C. Kassenboehmer (Contact Author)

Monash University - Centre for Health Economics ( email )

Building 75, 15 Innovation Walk
Monash University
Clayton, Victoria 3800
Australia

Mathias Sinning

Australian National University (ANU) - Crawford School of Public Policy ( email )

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

HOME PAGE: http://www.mathiassinning.com

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