The Ostrich in Us

Selective Attention to Financial Accounts, Income, Spending, and Liquidity

Arna Olafsson, Michaela Pagel

Research output: Working paperResearch

Abstract

A number of theoretical research papers in micro as well as macroeconomics model and analyze attention but direct empirical evidence remains scarce. This paper investigates the determinants of attention to financial accounts using panel data from a financial management software provider containing daily logins, discretionary spending, income, balances, and credit limits. We find that individuals are considerably more likely to log in because they get paid utilizing exogenous variation in paydays due to weekends and holidays. Beyond looking at the causal effect of income on attention, we examine how attention depends on individual spending, balances, and credit limits within individuals’ own histories. We find that attention is decreasing in spending and overdrafts and increasing in cash holdings, savings, and liquidity. Moreover, attention jumps discretely when balances change from negative to positive. We argue that our findings cannot be explained by rational theories of inattention. Instead our findings are consistent with Ostrich effects and anticipatory utility as the main motivation for paying attention to financial accounts and thus provide new tests for information- or belief-dependent utility models. Furthermore, we show that some of our findings can be explained by a recent influential one of those models (Kőszegi and Rabin, 2009), which assumes individuals experience utility over news or changes in expectations about consumption.
Original languageEnglish
Place of PublicationCambridge, MA
PublisherNational Bureau of Economic Research (NBER)
Number of pages46
DOIs
Publication statusPublished - Oct 2017
SeriesNational Bureau of Economic Research. Working Paper Series
Number23945
ISSN0898-2937
SeriesCentre for Economic Policy Research. Discussion Papers
Number12259
ISSN0265-8003

Cite this

Olafsson, A., & Pagel, M. (2017). The Ostrich in Us: Selective Attention to Financial Accounts, Income, Spending, and Liquidity. Cambridge, MA: National Bureau of Economic Research (NBER). National Bureau of Economic Research. Working Paper Series, No. 23945, Centre for Economic Policy Research. Discussion Papers, No. 12259 https://doi.org/10.3386/w23945
Olafsson, Arna ; Pagel, Michaela. / The Ostrich in Us : Selective Attention to Financial Accounts, Income, Spending, and Liquidity. Cambridge, MA : National Bureau of Economic Research (NBER), 2017. (National Bureau of Economic Research. Working Paper Series; No. 23945). (Centre for Economic Policy Research. Discussion Papers; No. 12259).
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The Ostrich in Us : Selective Attention to Financial Accounts, Income, Spending, and Liquidity. / Olafsson, Arna ; Pagel, Michaela.

Cambridge, MA : National Bureau of Economic Research (NBER), 2017.

Research output: Working paperResearch

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