How do Psychological Factors affect Household Savings behavior?
Psychological factors have been emerging as a new source to explain saving behaviors in recent researches. However, their effects are not homogeneous but vary widely across groups. This study aims to analyze and distinguish such groups, in which psychological factors impact on savings differently. Going beyond the traditional OLS regression, this study also employs Finite Mixture Model to identify these latent unobservable classes and how psychological factors affect savings in each class. This approach also allows us to estimate how socio-demographic characteristics of a person can predict which class he/she is more likely to belongs to. Results from Finite Mixture Model on a Dutch representative dataset (n = 923) indicates that psychological factors affect saving behaviors differently between 2 classes: Class 1 – the younger and poorer; and Class 2: the older and well-established. The findings are important because it helps us understand the real drivers of savings among individuals and assist policymakers to customize their actions to improve household savings. Keywords: Saving behavior; Psychological factors, Latent class, Household finance, Finite mixture model.
Faculteit der Managementwetenschappen