ABSTRACT
This article studies the effects of factors such as income gaps within couples on their division of financial decision-making. Using unique data obtained from the China Household Finance Survey (CHFS), we find that family financial decision-making is dominated by husbands, if they work in financial industries. Moreover, the larger the gap between his income and his wife’s, the more likely the husband is to make decisions on household financial matters. Lastly, our result rejects Hypothesis 2, suggesting that Chinese men tend to hold decision-making power initially, while their wives tend to hold this power as they age.
Notes
1. The HSBC survey report covers 17 countries and regions in the world, involving more than 17,000 people.
2. Time preference means that individual behavior shows greater preference for the present over the future. The time preference ratio is equal to the marginal rate of substitution of current utility and future utility, which is represented as a discount rate.
3. In the CHFS, this question is asked to learn about the basis of the visited household’s investment decisions, which is subject to the participants’ own judgment.
4. We eliminate the income gap in observed households to calculate the regional_income gap in the province where the couple lives—that is, the average income gap of other households in a province excluding the household observed. Therefore, the chosen instrumental variable is related to the independent variable but has no direct relation to the dependent variable.