Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/202615 
Year of Publication: 
2017
Series/Report no.: 
Memorandum No. 07/2017
Publisher: 
University of Oslo, Department of Economics, Oslo
Abstract: 
We provide an explanation of the low willingness to save that is observed in many poor countries. Our explanation is based on the hypothesis that people have an over-optimistic outlook. As discussed in the psychological literature, an illusionary positive view of the future may be a good thing. However, we show that it can lead individuals to accumulate unsustainable levels of debt. Using survey data from South Africa, we confirm that poor people are indeed overly optimistic, and also that optimism is positively and significantly related to debt accumulation.
Subjects: 
poverty
savings
discounting
debt
JEL: 
D03
D14
O1
O12
Document Type: 
Working Paper

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