Portfolio Choice With Intra-Household Bargaining and Gender Differences in Preferences

Abstract

In this paper, we combine the literature on intra-household bargaining, gender differences in preferences, and social norms to understand the financial decision making of households. We derive a theoretical model which describes the portfolio choice decision of a two-person household, where both members have different preferences with regard to risk and time. We then use data from the Health and Retirement Study for the years 1992–2016 to test hypotheses derived from this model. In contrast to the literature, we find that the bargaining power of the wife does not affect the share of risky assets held by the household once we control for preferences. We find that time preferences and risk preferences affect the financial decision making, while social norms do not. Our results are robust to a wide range of robustness checks and are relevant for researchers, policy makers, and financial advisors.