The Ostrich in Us: Selective Attention to Financial Accounts, Income, Spending, and Liquidity

Working Paper No. 23945 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 softwa...

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Bibliographic Details
Published inNBER Working Paper Series p. 23945
Main Authors Olafsson, Arna, Pagel, Michaela
Format Paper
LanguageEnglish
Published Cambridge National Bureau of Economic Research, Inc 01.10.2017
Subjects
Account aggregation
Banking
Budgets
Consumer behavior
Consumption
Cost control
Economic models
Economic theory
Financial management
Holidays & special occasions
Macroeconomics
Opportunity costs
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Summary:Working Paper No. 23945 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.
ISSN:0898-2937
DOI:10.3386/w23945