Culture and Portfolios: Trust, Precautionary Savings and Home Ownership

71 Pages Posted: 18 Aug 2020

See all articles by Johannes Fleck

Johannes Fleck

European University Institute

Adrian Monninger

Deutsche Bundesbank

Date Written: August, 2020


This paper shows that individual beliefs on the effectiveness of formal and informal sources of risk sharing determine financial precautionary behavior. We present empirical evidence demonstrating that higher trust in public insurance systems reduces net liquid wealth while higher trust in communal insurance increases it. This dichotomy is consistent with theories on access to private risk sharing networks. Moreover, we find that both types of trust associate positively with the probability to take on financial risk for the purpose of becoming a homeowner and the related loan-to-value ratio. Our findings are robust across a wide range of econometric controls and specifications.

Keywords: household saving, portfolio liquidity, public and communal insurance

JEL Classification: D14, D31, E71, G5

Suggested Citation

Fleck, Johannes and Monninger, Adrian, Culture and Portfolios: Trust, Precautionary Savings and Home Ownership (August, 2020). ECB Working Paper No. 20202457, Available at SSRN: or

Johannes Fleck (Contact Author)

European University Institute ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014

Adrian Monninger

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431

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