Household investment decisions and offspring gender: parental accounting

Abstract

Numerous behavioural factors have been identified as having an impact on household stockholding decisions. Given there is both theoretical and empirical evidence to support the premise that offspring gender can influence specific types of parental preferences, I test the theory that offspring gender has an effect on parental investment decision-making. I find that offspring gender does influence household stock market participation. Specifically, I find that having only female offspring can significantly increase the probability of stockholding. Given stockholding can have large effects on household wealth levels and that family wealth levels affect intergenerational transfers, this finding could have important implications for understanding distributional welfare issues.

Keywords:

• investments
• stockholding
• offspring
• parental behaviour

JEL Classification:

• G11
• D14

View correction statement:

Erratum

Acknowledgements

I thank Chris Barrett, Garrick Blalock, Nancy Chau, James Choi, Rachel Croson, Catherine Eckel, David Just, Aija Leiponen, Marie Mora, Ebonya Washington and seminar participants at the University of Texas – Dallas and Binghamton University for useful comments and discussions. I also thank Sayako Seto and Feng Wang for research assistance.

Notes

1. The interviews record information about the sources and amounts of income received during the past calendar year by the respondent and his or her spouse or partner. Data on income sources of an opposite-sex partner are available beginning in 1990. If a respondent volunteers such information for a same-sex partner, that information also is recorded. Income sources identified include the respondents’ and their spouses’ or partners’ wages and salaries, income from military service, profits from a farm or business, social security, pensions and annuities, and alimony/child support.

2. All dollar amounts are in real 2004 dollars.

3. I classify a respondent as risk averse if (s) he prefers a certain salary to a lottery between a 50% chance of doubling his/her salary and a 50% chance of getting his/her salary cut by .

4. Households with only male children are more risk averse than households with only female children. This difference is statistically significant for the single female and single male subgroups.

5. The education, income and voluntary contribution pension variables also serve to control for aspects of a respondent’s occupation or training that could lead to increased stock market participation.

6. The probit models contain those variables previously shown to be significant in explaining the probability of holiding stock in the US (see, for example, Bertaut, 1998; Hong et al., 2004; Bogan, 2008).

7. In additional robustness checks of the model, I also control for respondent region of residence with region dummy variables (Northeast, Midwest, South and West). Regional controls do not affect the results in any meaningful way.

8. Due to data limitations, it is not possible to perform a true fixed effects analysis. The hold stock variable was only collected in 2004. In previous years, respondents were asked if they held either stocks or bonds in one question.

9. While the gender of each offspring is exogenous, the gender composition of the family may not be completely exogenous due to fertility choice. Thus, I control for family size with dummy variables for no children, one child, two children and three children. Notably, households with all female children have the same average number of children as households with all male children.

10. Some controversial areas of evolutionary biology assert maternal effects on the sex of offspring (see Grant). This notion is not widely accepted in the science literature. Nonetheless in the robustness checks section, I will perform an analysis to address this issue.

11. Furthermore, the magnitude of the having only male children coefficient is significantly lower than the having only female children coefficient.

12. The standard errors are larger due to the smaller sample available: n = 72 for the single female subgroup, n = 64 for the single male subgroup and n = 261 for the married respondent subgroup. Full regression results available upon request.