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Household Finance

Author

Listed:
  • Francisco Gomes
  • Michael Haliassos
  • Tarun Ramadorai

Abstract

Household financial decisions are complex, interdependent, and heterogeneous, and central to the functioning of the financial system. We present an overview of the rapidly expanding literature on household finance (with some important exceptions) and suggest directions for future research. We begin with the theory and empirics of asset market participation and asset allocation over the life cycle. We then discuss household choices in insurance markets, trading behavior, decisions on retirement saving, and financial choices by retirees. We survey research on liabilities, including mortgage choice, refinancing, and default, and household behavior in unsecured credit markets, including credit cards and payday lending. We then connect the household to its social environment, including peer effects, cultural and hereditary factors, intra-household financial decision-making, financial literacy, cognition, and educational interventions. We also discuss literature on the provision and consumption of financial advice.

Suggested Citation

  • Francisco Gomes & Michael Haliassos & Tarun Ramadorai, 2021. "Household Finance," Journal of Economic Literature, American Economic Association, vol. 59(3), pages 919-1000, September.
    • Handle: RePEc:aea:jeclit:v:59:y:2021:i:3:p:919-1000
    DOI: 10.1257/jel.20201461
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    Cited by:

    1. Hector Calvo-Pardo & Xisco Oliver & Luc Arrondel, 2021. "Subjective Return Expectations, Perceptions, and Portfolio Choice," JRFM, MDPI, vol. 15(1), pages 1-29, December.
    2. Steffen Ahrens & Ciril Bosch-Rosa & Thomas Meissner, 2022. "Intertemporal consumption and debt aversion: a replication and extension," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 8(1), pages 56-84, December.
    3. Longmuir, Maximilian, 2026. "Return Heterogeneity vs. Participation: The Big Levers of Financial Wealth Inequality?," SocArXiv 7hkj6_v1, Center for Open Science.
    4. Madeira, Carlos, 2021. "The potential impact of financial portability measures on mortgage refinancing: Evidence from Chile," Journal of International Money and Finance, Elsevier, vol. 117(C).
    5. Stijn P. M. Broekema & Marc M. Kramer, 2021. "Overconfidence, Financial Advice Seeking and Household Portfolio Under-Diversification," JRFM, MDPI, vol. 14(11), pages 1-15, November.
    6. König, Johannes & Longmuir, Maximilian, 2025. "Wage risk and portfolio choice: The role of correlated returns," International Review of Financial Analysis, Elsevier, vol. 100(C).
    7. Stylianos Papageorgiou & Dimitrios Xefteris, 2021. "A Collective Investment in Financial Literacy by Heterogeneous Households," University of Cyprus Working Papers in Economics 04-2021, University of Cyprus Department of Economics.
    8. Fisher, Jack & Gavazza, Alessandro & Liu, Lu & Ramadorai, Tarun & Tripathy, Jagdish, 2024. "Refinancing cross-subsidies in the mortgage market," Journal of Financial Economics, Elsevier, vol. 158(C).
    9. Aris Ananta & Ahmad Irsan A. Moeis & Hendro Try Widianto & Heri Yulianto & Evi Nurvidya Arifin, 2021. "Pension and Active Ageing: Lessons Learned from Civil Servants in Indonesia," Social Sciences, MDPI, vol. 10(11), pages 1-17, November.
    10. Lukas Menkhoff & Carsten Schröder, 2022. "Risky Asset Holdings During Covid‐19 and their Distributional Impact: Evidence from Germany," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(2), pages 497-517, June.

    More about this item

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G50 - Financial Economics - - Household Finance - - - General
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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