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Genetic and environmental influences on household financial distress

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  • Xu, Yilan
  • Briley, Daniel A.
  • Brown, Jeffrey R.
  • Roberts, Brent W.

Abstract

Heterogeneity of household financial outcomes emerges from various individual and environmental factors, including personality, cognitive ability, and socioeconomic status (SES), among others. Using a genetically informative data set, we decompose the variation in financial management behavior into genetic, shared environmental and non-shared environmental factors. We find that about half of the variation in financial distress is genetically influenced, and personality and cognitive ability are associated with financial distress through genetic and within-family pathways. Moreover, genetic influences of financial distress are highest at the extremes of SES, which in part can be explained by neuroticism and cognitive ability being more important predictors of financial distress at low and high levels of SES, respectively.

Suggested Citation

  • Xu, Yilan & Briley, Daniel A. & Brown, Jeffrey R. & Roberts, Brent W., 2017. "Genetic and environmental influences on household financial distress," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 404-424.
    • Handle: RePEc:eee:jeborg:v:142:y:2017:i:c:p:404-424
    DOI: 10.1016/j.jebo.2017.08.001
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    More about this item

    Keywords

    Household finance; Personality traits; Cognitive ability; Socioeconomic status; Behavior genetics;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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