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Can having internal locus of control insure against negative shocks? Psychological evidence from panel data

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  • Buddelmeyer, Hielke
  • Powdthavee, Nattavudh

Abstract

We investigate whether the intensity of emotional pain following a negative shock is different across the distribution of a person's locus of control – the extent to which individuals believe that their actions can influence future outcomes. Using panel data from Australia, we show that individuals with strong internal locus of control are psychologically insured against own and others’ serious illness or injury, close family member detained in jail, becoming a victim of property crime and death of a close friend, but not against the majority of other life events. The buffering effects vary across gender. Our findings thus add to the existing literature on the benefits of internal locus of control.

Suggested Citation

  • Buddelmeyer, Hielke & Powdthavee, Nattavudh, 2016. "Can having internal locus of control insure against negative shocks? Psychological evidence from panel data," Journal of Economic Behavior & Organization, Elsevier, vol. 122(C), pages 88-109.
    • Handle: RePEc:eee:jeborg:v:122:y:2016:i:c:p:88-109
    DOI: 10.1016/j.jebo.2015.11.014
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    More about this item

    Keywords

    Locus of control; Resilience; Well-being; Happiness; HILDA;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • I19 - Health, Education, and Welfare - - Health - - - Other

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