Spouses in The Same Boat: Labor Income Risk and Intra-Household Risk Sharing

59 Pages Posted: 17 Apr 2024

See all articles by Singsen Lam

Singsen Lam

The Chinese University of Hong Kong (CUHK)

Date Written: March 23, 2024

Abstract

This paper proposes a novel channel for households’ choices of risky asset allocation: more intra-household risk sharing reduces labor income risk for dual-earner couples, thus encouraging households’ financial risk-taking. Capturing intra-household risk sharing by conditional income correlation between spouses’ industries, I find that more income risk sharing within couples increases households’ financial risk-taking. Using unexpected events of spousal death, I causally identify the impact of intra-household risk sharing on households’ portfolio choices. My study implies an unintended consequence of positive assortative mating for wealth inequality by discouraging disadvantaged households’ financial risk-taking.

Suggested Citation

Lam, Singsen, Spouses in The Same Boat: Labor Income Risk and Intra-Household Risk Sharing (March 23, 2024). Available at SSRN: https://ssrn.com/abstract=4769967 or http://dx.doi.org/10.2139/ssrn.4769967

Singsen Lam (Contact Author)

The Chinese University of Hong Kong (CUHK) ( email )

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