Is There Evidence of Loss Aversion in Saving Behaviors in Spain?

Abstract

This study uses data from the 2005 Survey of Household Finances to investigate the existence of loss aversion in household saving behavior in Spain. Loss aversion refers to an asymmetry in saving behavior in response to increases and decreases in income, where income decreases have a greater effect than increases. Evidence of loss aversion in household saving behaviors in the U.S. has been presented in previous research, and evidence of loss aversion in saving has been found using aggregate data from Europe, but to date there are no household level studies on loss aversion and saving behaviors in Europe. The present results do not support the existence of loss aversion at the household level in Spain. The results indicate symmetry in the responses to positive and negative income changes, failing to provide support for loss aversion in household saving behaviors.