Adversity Magnifies Genetic Influence on Savings Behavior

Abstract

This paper studies how adversity alters the role of genes in determining savings behavior. The identification is based on genetic similarity between twins, which differs by whether they are monozygotic or dizygotic, combined with a unique policy “experiment” in China, which unexpectedly exposed affected youths to adversity. Using Chinese urban twins data, estimates reveal that adolescent exposure to adverse circumstances magnifies the influence of genes: individuals affected by the policy exhibit a stronger genetic predisposition towards saving compared to unaffected individuals. Our finding helps understand how genes and external environment shape individual decision-making, by their own and by their interplay.

Keywords: Savings behavior, Gene-environment interaction, Adversity, Twins study, Individual decision-making

JEL Classification: D14, D87, G51, J62