Peer Effects in Financial Decisions: Evidence from Dutch Administrative Data

We study whether, to what extent, and how a couple’s decision to invest into risky assets the first time is affected by their social environment, in particular by their (adult) siblings and their coworkers. We provide causal evidence of peer effects in financial decisions, making use of Dutch administrative data and an IV strategy with partially overlapping peer groups. We find that positive asset market experiences of siblings, as well as of coworkers, generate positive spillover effects in terms of first-time investments in risky assets. These effects are primarily driven by the siblings and coworkers of the male partner in the couple ("receiver" of the signal). However, coworker spillovers are also relevant for full-time employed women. In terms of "sender" of the signal, only male coworkers lead to spillovers, for the couple overall and for female and male partner separately, consistent with men being more likely to talk about their financial successes. Heterogeneity analyses show that peer spillovers are particularly important for highly (financially) educated and more privileged couples, consistent with them having the financial means as well as the (financial) knowledge to be able to evaluate and respond to the signal of positive asset market experiences of peers.