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UNDERSTANDING THE EFFECTS OF MARRIAGE AND DIVORCE ON FINANCIAL INVESTMENTS: THE ROLE OF BACKGROUND RISK SHARING
Author(s) -
Christiansen Charlotte,
Joensen Juanna Schröter,
Rangvid Jesper
Publication year - 2015
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12113
Subject(s) - economics , demographic economics , panel data , affect (linguistics) , investment (military) , financial risk , marital status , british household panel survey , survey data collection , panel study of income dynamics , labour economics , finance , econometrics , demography , psychology , population , statistics , mathematics , communication , sociology , politics , political science , law
We investigate how changes in marital status affect financial investments and how these effects vary with background risk. We use detailed register‐based panel data and difference‐in‐differences estimators to benchmark common unobserved influences on financial investments. Women increase the fraction of wealth invested in stocks after marriage and decrease it after divorce, whereas men show the opposite behavior. Households whose joint labor income risk is reduced more by marriage have a higher increase in their exposure to risky assets in marriage. Thus income risk sharing in the household is important for financial risk taking and investment responses to marital transitions. (JEL G11, J12, J16, D14)