Early Childhood Deprivation Leads to Greater Savings
Research
11.10.2024
ZEW Study Shows: Early Childhood Deprivation Increases Later Saving Behaviour
Italians who experienced World War II and meat shortages in their childhood tend to put more money aside for hard times later in life. This is the result of a study by ZEW Mannheim, the Erasmus University Rotterdam and the University of Utrecht.
The study analyses the effects of meat shortage in Italy in the years 1941 to 1945 during World War II on the savings behaviour of the affected cohorts. For the study, historical data on the number of livestock slaughtered for meat were combined with survey data from the Italian Survey on Household Income and Wealth (SHIW). The SHIW provides detailed information on Italian households, including savings, income, wealth and personal characteristics of household members. Using econometric methods, the authors analyse the long-term effects of meat shortages on individuals’ patience and savings behaviour.
Causal link between meat shortage and savings
“The first years of life are known to be decisive for personal development. Our research shows that early life conditions also play a critical role in the development of patience. In particular, experiences of protein scarcity in the form of meat shortages can leave a deep imprint that leads people to act more cautiously und save more money,” explains Efi Adamopoulou, PhD, co-author of the study from the ZEW Research Group “Inequality and Distribution Policy”.
Experiences of scarcity also have an impact on the development of patience. This was determined using a question in the SHIW: Suppose the head of the household won a prize in a lottery equal to the household’s net annual income. What percentage of the winnings would they be willing to give up in order to receive the money immediately rather than in a year’s time: 20, 10, 5, 3, or 2 per cent? Those who chose 20 percent were classified as impatient. For people who experienced meat shortages in Italy when they were young, the probability of being impatient is 2.5 percentage points lower than for those who were born after the scarcity was over – so those affected are more patient.
A more patient household head in turn tends to exhibit stronger savings behaviour. If the person experienced meat shortages during the critical ages of zero to three years (birth years 1942 to 1945), household savings increase by more than five per cent, when their heads are 59 to 62 years old (in 2004).
The effect of scarcity on patience and its implications for savings
“Scarcity in the early years profoundly impacts how strongly patience is developed as a character trait. The Italian figures suggest the following: Those who endure scarcity at a young age apparently develop lasting behavioural patterns that enable them to cope better with deprivation later in life. This coping mechanism is particularly evident in the savings behaviour of the Italian sample group: Savings often serve as a strategy to mitigate future uncertainties. This underlines the importance of early childhood experiences for one’s whole life,” emphasises Adamopoulou.
