Future Orientedness

John Knowles () and Andrew Postlewaite
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John Knowles: Simon Fraser University

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: We develop an index of "future orientedness" based on how an individual’s attitudes to planning for the future, reported in the PSID in the 1970s, predict the growth rate of household wealth many years later. Our results suggest that variation in future orientedness is more about effective planning than about discounting the future. Wives appear to have much less influence than husbands over household savings but transmit future orientedness to offspring more reliably. Variation in future orientedness is distinct from financial sophistication or opportunity, as it also helps to predict non-financial choices, such as smoking, health and the timing of children. Simulation of the cumulative effects over the lifetime suggests that variation in future orientedness increases inequality of wealth at retirement, boosting the Gini coefficient by 10-20%.

Keywords: Family Economics; Inequality; Household Formation; Household Economics (search for similar items in EconPapers)
JEL-codes: D10 D19 D31 D80 D83 H31 H52 I24 J11 J12 J18 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2023-10-31
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