Shrinking Families: How Does Demographic Decline Shape Investors?

Abstract

Fertility rates are declining worldwide, producing a growing share of only children. Exploiting China's One-Child Policy in a regression discontinuity design, we show that only children are significantly more risk-averse, less trusting, and less socially engaged than individuals with siblings. These trait differences reduce participation in FinTech (online lending, digital wealth management, and mobile payments) but not traditional finance. The effects are economically large, persist after accounting for differences in economic resources and digital access, and concentrate among less educated individuals and in regions with weaker investor protection. Only children also retreat more sharply from digital platforms following scandals, confirming trust as an operative mechanism. As the financial system becomes increasingly digital, demographic decline may impose a psychological constraint on financial modernization.