​Financial inequality within couples: how does it affect financial risk-taking?

A TFI research project by Dimitris Christelis, Dimitris Georgarakos and Tullio Jappelli
Posted on December 21, 2020

Does having more money, either earned or saved, make one partner in a couple more influential as far as economic decisions are concerned? How does within-couple inequality affect the degree of a couple's risk-taking, especially when it comes to financial investments? That’s the main research question Dimitris Christelis, Dimitris Georgarakos and Tullio Jappelli analyse anaysed in this project for the Think Forward Initiative.

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Does having more money, either earned or saved, make one partner in a couple more influential as far as economic decisions are concerned? How does within-couple inequality affect the degree of a couple's risk-taking, especially when it comes to financial investments? That’s the main research question we analyse in this project for the Think Forward Initiative.

One possibility is that the more unequal the ownership of economic resources between both partners, the more likely it is that the 'richer' partner will have the upper hand in determining how much to invest in risky financial assets such as stocks. If so, one would expect that the richer partner would be more likely to invest in risky financial assets, either alone or on behalf of his/her partner.

Another possibility is that unequal ownership of economic resources within the couple could increase the economic insecurity of the 'poorer' partner, which could in turn make him/her more reluctant to contemplate undertaking financial risk, especially if the ownership of risky financial assets is joint. An unequal division of resources between the couple would also lead to higher exposure to overall risk, especially if partner incomes are highly and positively correlated. Consequently, the economic resources of the richer partner would likely be more heavily invested in safer assets, in order to mitigate the financial insecurity of the poorer partner. Such de-risking of a household’s portfolio is particularly important in times of financial stress, such as the one we currently observe because of the coronavirus pandemic.

Data and results

Whether in practice unequal within-couple ownership of financial resources affects financial risk-taking, is an issue that needs to be investigated through empirical analysis. We explore this issue using data (2002-2018) from the Household Survey of the Dutch National Bank (DHS), concentrating on the unequal distribution of bank account balances as an indication of the differential bargaining power possessed by both partners.

The DHS is an annually conducted survey of around 2,000 Dutch households that is sponsored by the Dutch National Bank and maintained by CentERdata at Tilburg University. The survey provides extensive information on demographic characteristics, asset and debt holdings, housing, work, health and income, as well as economic and psychological attitudes. The survey is representative of the Dutch population and is conducted via the Internet. Survey respondents are asked to interview over different years on a rotating basis, which allows us to use panel data methods. Our sample consists of approximately 18,000 observations from 3,770 households.

Typically, previous literature measures the bargaining power within the household through the partners’ income share, rather than through their asset share. Our survey data allow us to observe the financial assets of both partners in a couple, as well as all types of bank accounts (think of current or saving accounts), both jointly and separately owned, and therefore to improve with respect to previous measures of economic inequality within the household.

To measure the unequal distribution of financial resources within the couple, we use the bank account balances reported by each partner as a share of the total amount of bank accounts owned by both partners, either individually or jointly. The greater than 0.5 the larger of the two partners’ bank account shares is, the more unequal the distribution of resources between the partners becomes. Accumulated bank account balances is a more reliable indicator of the financial circumstances of the couple than income: as opposed to account balances, income is often volatile from year to year, and a large part of it is consumed anyway. Account balances, on the other hand, reflect earnings and savings from several years back and provide a good indicator of a households' ability to overcome financial difficulties and cope with emergencies, consequently maintaining or improving their standard of living.

The survey also allows us to observe household investment in risky financial assets such as stocks (directly held and mutual funds). These investments are recorded at household level and may reflect both individual and joint ownership.

For our analysis, we focus on couples only. We estimate the effect of unequal ownership of economic resources by associating the largest share of bank account balances (between both partners) with investment in risky financial asset ownership, through directly held stocks and mutual funds. We take advantage of the repeated observations provided by the households in our sample (on average 4.6 observations per household) to reduce biases in our results and obtain more reliable estimates of the association between within-household inequality and risk taking.

Our preferred results using panel data methods suggest that an increase in the largest bank account share (which indicates an increase in within-couple inequality) by about 10 percentage points is associated a with a drop in the probability of investing in risky financial assets of about 1 percent. Given that in the sample the prevalence of the combined ownership of directly held stocks and mutual funds is 26%, the size of this association is modest but non-trivial. Moreover, we find that the effect of our measure of within-household inequality is stronger for mutual funds rather than for directly held stocks.


The result that increased within-couple inequality in economic resources is associated with less financial risk-taking suggests that households are inclined to de-risk their portfolio when a partner’s financial position worsens. This, in turn, implies that in times of financial distress - like during a pandemic - households are likely to disinvest from risky financial assets. Such disinvestment could lead to a reduced standard of living in the long term, as risky financial assets have historically earned a higher rate of return than safer assets such as bonds, even after adjusting for risk. It can also lead to firms having more difficult access to funds obtained through the stock market.

During the current crisis, it is of vital importance to implement policies that help reduce financial hardship and income volatility, and also that encourage and safeguard the persistent attachment of individuals to the job market. This will likely lead to a lower within-household inequality in economic resources, as well as lower financial insecurity experienced by households. This in turn could make households more willing to invest in risky financial assets.

Furthermore, our results imply that financial institutions should pay attention to the financial inequality within couples when engaging with households interested in investing in financial products. If couples experiencing higher inequality are less inclined to undertake risky financial investments, then financial institutions could alleviate this problem by providing information on the benefits of such investments.

More generally, given that partners with lower financial resources are also likely to be less educated on average, it is also important that these partners improve their financial sophistication. This could happen not only on their own initiative but also after being encouraged to do so by policy makers, including financial regulators. Given that higher financial literacy has been associated with increased financial risk-taking, more financially literate households are more likely to be aware of the long-term benefits of investment in risky financial assets. Thus, they are less likely to abstain from financial risk-taking during difficult economic times.