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Financial Risk Taking and Differential Bargaining Power Within the Household

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Abstract

Using survey data from a representative sample of Dutch households from 2002 to 2018, we examine whether inequality of amounts held in bank accounts within couples affects financial risk-taking. Using both ordinary least squares and panel data methods, we find that such inequality is associated with a reduced propensity to invest in stocks directly held and/or mutual funds. Specifically, an increase by 10 percentage points in the maximum share of bank account balances is associated with a drop in the probability to invest in risky financial assets by 1 percentage point. The results suggest that higher economic inequality between the two partners leads to a desire to de-risk the household’s financial portfolio. This in turn implies that in times of financial distress adverse economic outcomes that intensify within-household economic inequalities (such as job loss of one partner) could lead households to withdraw money from financial markets.

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  • Dimitris Christelis & Dimitris Georgarakos & Tullio Jappelli, 2020. "Financial Risk Taking and Differential Bargaining Power Within the Household," CSEF Working Papers 594, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  • Handle: RePEc:sef:csefwp:594
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    More about this item

    Keywords

    Financial Risk-Taking; Within-Couple Economic Inequality; Bargaining Power; Bank Accounts.;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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