National Culture and Household Finance

Abstract

In a series of cross-country comparisons, we show that national culture has a considerable impact on the characteristics of household finance. Using the Schwartz cultural value model and data on household finance, we analyze the impact of national culture on the use of deposits, equities, debt securities, life insurance, and pension funds in household portfolios. National culture is a strong indicator for the portfolio structure: Egalitarianism versus Hierarchy is negatively related to the use of deposits, Autonomy versus Embeddedness is negatively related to the use of debt securities and positively related to the use of life insurance and pension funds. The findings suggest several implications for the field of household financial engineering, as for household investments additional features of welfare seem to matter beyond expected return and return variance.

Keywords: national culture, household finance, portfolio choice, saving behavior, consumption

JEL Classification: A13, D14, G11, Z13