Behavioral Response to Shock Exposure: COVID-19 Pandemic and Long-Term Savings ()
ABSTRACT
Providing future generations with sustainable and inclusive financial security
during retirement is an important policy objective for developing countries. This
study investigates the behavioral attitude of formal income earners during the COVID-19
pandemic in Uganda by examining individual perceptions in regards to access to long-term
savings. The study explores the underlying behavioral mechanism by analyzing the
effect of COVID-19 shock exposure on individual time preferences, as elicited from
an economic experiment with randomly sampled subjects.
Combining survey and experimental data, the results illustrate that shock
exposure induces higher discount rates, and has an effect on subject’s dynamic inconsistency. Those who report to having been affected by COVID-19 are more impatient, and are more likely to seek
for early access to their long-term savings (e.g. NSSF or Occupational Pension funds).
Further, we find a heterogeneous impact among the subjects. Male subjects, those who are indebted to servicing a loan, and those who did not receive a remittance
within the last 3 months are found to be more impatient and are more likely to seek
for early access to their long-term savings. On the contrary, we further find that
females who prefer early access to their long-term savings are more present biased than their male counterparts. The
results of this study suggest to us that formal income workers will consider saving
for long-term through a forced saving mechanism. The findings from the study have
important implications for public policy efforts to address long-term savings behavior.
Share and Cite:
Makanga, B. , Walusimbi, V. and Nakawesi, C. (2022) Behavioral Response to Shock Exposure: COVID-19 Pandemic and Long-Term Savings.
Open Journal of Business and Management,
10, 1310-1331. doi:
10.4236/ojbm.2022.103071.
Cited by
No relevant information.