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Locus of control and savings

Deborah Cobb-Clark (), Sonja C. Kassenboehmer and Mathias Sinning
Authors registered in the RePEc Author Service: Sonja Cornelia de New

Journal of Banking & Finance, 2016, vol. 73, issue C, 113-130

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 causal relationship between their own behavior and life events. We find that households with an internal reference person (a main respondent who believes that he/she can generally control relevant aspects of life) save more in terms of levels and, in some cases, 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, our findings indicate that households with an internal reference person are in a better position to save in forms that are harder to access (such as pension wealth) than otherwise similar households with an external reference person.

Keywords: Non-cognitive skills; Locus of control; Wealth accumulation; Asset portfolios; Savings (search for similar items in EconPapers)
JEL-codes: G02 G11 I31 R21 (search for similar items in EconPapers)
Date: 2016
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Related works:
Working Paper: Locus of Control and Savings (2014) Downloads
Working Paper: Locus of Control and Savings (2013) Downloads
Working Paper: Locus of Control and Savings (2013) Downloads
Working Paper: Locus of Control and Savings (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:73:y:2016:i:c:p:113-130

DOI: 10.1016/j.jbankfin.2016.06.013

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