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

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  • Renneboog, L.D.R.
  • Spaenjers, C.

    (Tilburg University, Tilburg Law and Economics Center)

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.

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Bibliographic 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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Web page: http://www.tilburguniversity.nl/tilec/

Related research

Keywords: Economic Attitudes; Culture; Religion; Household finance; Portfolio choice; Trust;

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References

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Cited by:
  1. Anja Klaubert, 2010. "“Striving for Savings” – religion and individual economic behavior," Working Paper Series in Economics 162, University of Lüneburg, Institute of Economics.

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