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Where Angels Fear to Trade: The Role of Religion in Household Finance

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Author Info
Renneboog, L.D.R.
Spaenjers, C. (Tilburg University, Tilburg Law and Economics Center)

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Abstract

Although the relationship between religion and economic development on the macro-level has been investigated, it is less clear how religious background influences economic attitudes and financial decision-making on the level of the individual or household, the micro-level. We use panel data from the extensive DNB Household Survey, covering the period from 1995 to 2008, to investigate whether - and through which channel - religious denomination affects household finance in the Netherlands. We find evidence that, in general, religious households care more about saving, are more risk-averse, consider themselves more trusting, have a more external locus of control, and have a stronger request motive. Furthermore, Catholics and Protestants have longer planning horizons, and Protestants and Evangelicals seem to have a greater sense of individual financial responsibility. Most of these factors matter for household financial decision-making, albeit to differing degrees. Using our religion variables as instruments for economic attitudes (and controlling for demographic and background risk characteristics), we demonstrate that the above-mentioned differences in economic beliefs and preferences explain the higher propensity to save by religious households in general and the lower investments in risky assets by Catholic households. Keywords: Economic Attitudes, Culture, Religion, Household finance, Portfolio choice, Trust JEL Classifications: A1, D1, Z1 Series: TILEC Discussion Paper

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Publisher Info
Paper provided by Tilburg University, Tilburg Law and Economic Center in its series Discussion Paper with number 2009-018.

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Date of creation: 2009
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Handle: RePEc:dgr:kubtil:2009018

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