Where Angels Fear to Trade: The Role of Religion in Household Finance

L.D.R. Renneboog, C. Spaenjers

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Abstract

Although the relationship between religion and economic development on the macro-level has been investigated, it is less clear how religious background influences economic attitudes and financial decision-making on the level of the individual or household, the micro-level. We use panel data from the extensive DNB Household Survey, covering the period from 1995 to 2008, to investigate whether – and through which channel – religious denomination affects household finance in the Netherlands. We find evidence that, in general, religious households care more about saving, are more risk-averse, consider themselves more trusting, have a more external locus of control, and have a stronger bequest motive. Furthermore, Catholics and Protestants have longer planning horizons, and Protestants and Evangelicals seem to have a greater sense of individual financial responsibility. Most of these factors matter for household financial decision-making, albeit to differing degrees. Using our religion variables as instruments for economic attitudes (and controlling for demographic and background risk characteristics), we demonstrate that the above-mentioned differences in economic beliefs and preferences explain the higher propensity to save by religious households in general and the lower investments in risky assets by Catholic households.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages40
Volume2009-34
Publication statusPublished - 2009

Publication series

NameCentER Discussion Paper
Volume2009-34

Keywords

  • Economic Attitudes
  • Culture
  • Religion
  • Household finance
  • Portfolio choice
  • Trust

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