Perceived Precautionary Savings Motives: Evidence from FinTech

61 Pages Posted: 6 Dec 2019

See all articles by Francesco D'Acunto

Francesco D'Acunto

Boston College

Thomas Rauter

University of Chicago - Booth School of Business

Christoph Scheuch

Vienna Graduate School of Finance (VGSF); WU (Vienna University of Economics and Business)

Michael Weber

University of Chicago - Finance

Date Written: December 4, 2019

Abstract

We study the consumption response to the provision of credit lines to individuals that previously did not have access to credit combined with the possibility to elicit directly a large set of preferences, beliefs, and motives. As expected, users react to the availability of credit by increasing their spending permanently and reallocating consumption from non-discretionary to discretionary goods and services. Surprisingly, though, liquid users react more than others and this pattern is a robust feature of the data. Moreover, liquid users lower their savings rate, but do not tap into negative deposits. The credit line seems to act as a form of insurance against future negative shocks and its mere presence makes users spend their existing liquidity without accumulating any debt. By eliciting preferences, beliefs, and motives directly, we show these results are not fully consistent with models of financial constraints, buffer stock models with and without durables, present-bias preferences, uncertainty about future income, bequest motives, or the canonical life-cycle permanent income model. We label this channel the perceived precautionary savings channel, because liquid households behave as if they faced strong precautionary savings motives even though no observables suggest they should based on standard theoretical models.

Keywords: Household Finance, Consumption, Behavioral Finance

JEL Classification: D14, E21, E51, G21

Suggested Citation

D'Acunto, Francesco and Rauter, Thomas and Scheuch, Christoph and Weber, Michael, Perceived Precautionary Savings Motives: Evidence from FinTech (December 4, 2019). Chicago Booth Research Paper No. 19-26; Fama-Miller Working Paper; University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019-140. Available at SSRN: https://ssrn.com/abstract=3499013 or http://dx.doi.org/10.2139/ssrn.3499013

Francesco D'Acunto

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Thomas Rauter (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Christoph Scheuch

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, A-1020
Austria

HOME PAGE: http://christophscheuch.github.io/

WU (Vienna University of Economics and Business) ( email )

Welthandelsplatz 1
Vienna, A-1020
Austria

HOME PAGE: http://bach.wu.ac.at/d/research/ma/14198/

Michael Weber

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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