Financial Portfolio Choices and Marital Property Regimes

We study how marital property laws shape household saving and investment decisions, exploiting regional variation in statutory defaults across Spain. Using this variation as an instrument, we find that Separate Property reduces household saving but has no significant average effect on stock market participation. This null effect, however, masks sharply opposing responses: Separate Property increases participation by 8.9 percentage points when the wife is the financial head (the spouse most knowledgeable about household finances) and decreases it by 10.7 percentage points when the husband is, independently of spouses’ relative earnings. To explain these findings, we develop a dynamic collective life-cycle model with limited commitment, endogenous divorce, and portfolio choice. The model highlights two distinct channels: financial management shapes how property regimes affect stock market participation costs, while spouses’ ownership claims upon divorce influence saving and marital stability through endogenous asset titling. In a counterfactual that extends Separate Property to the rest of Spain, the model predicts lower divorce rates and a redistribution of welfare from husbands to wives. Our findings show that marital property laws shape household financial behavior not only through ownership rights, but also through the organization of financial decision-making within marriage.