Incompatible European Partners? Cultural Predispositions and Household Financial Behavior

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe Eurozone fiscal crisis has created pressure for institutional harmonization, but skeptics argue that cultural predispositions can prevent convergence in behavior. Our paper derives a robust cultural classification of European countries and utilizes unique data on natives and immigrants to Sweden. Classification based on genetic distance or on Hofstede's cultural dimensions fails to identify a single 'southern' culture but points to a 'northern' culture. Significant differences in financial behavior are found across cultural groups, controlling for household characteristics. Financial behavior tends to converge with longer exposure to common institutions, but is slowed down by longer exposure to original institutions. JEL Classification: G11, E21

Financial Literacy Externalities

“…41 Table O.A.16 presents estimation results for all samples. We find that an increase in the share of neighbors with economics or business education and some college attendance among this expanded circle of neighbors results in the same pattern of statistical signifi- 39 The IHS transformation introduces some allowance for non-linearity: for example, in a linear probability model, the coefficient on this variable is very close to the semi-elasticity of the share. Moreover, in unreported regressions, we have found that using the level of the share instead of its IHS transformation produces similar implications as those discussed in the text.…”

“…Guiso et al (2006) provided evidence that trust is influenced by ethnic origin in US data, while Guiso et al (2003) found evidence that trust is influenced by religion, both pointing to the relevance of culture. Haliassos et al (2017) found that financial behavior differs across cultural groups of migrants, controlling for a range of characteristics, but these differences diminish with exposure to host country institutions. 9 For evidence on the speed of assimilation of financial behavior of immigrants to Sweden, see Haliassos et al (2017).…”

“…Haliassos et al (2017) found that financial behavior differs across cultural groups of migrants, controlling for a range of characteristics, but these differences diminish with exposure to host country institutions. 9 For evidence on the speed of assimilation of financial behavior of immigrants to Sweden, see Haliassos et al (2017). 10 See in particular a recent paper by Chetty et al (2016).…”

“…We create four dummy variables, one for each quartile of the distribution of shares of financially literate neighbors in the initial neighborhood and introduce those in the regression instead of the (inverse hyperbolic sine of the) share of financially literate neighbors. 39 Table XI shows that the estimated effect of financial literacy externalities monotonically increases in the density of financially literate initial neighbors. In this cut of the data, the externalities in the bottom three quartiles are not precisely estimated, and we get statistically significant effects in the top quartile.…”

Who Are the Value and Growth Investors?

“…The growth tilt of immigrants can be attributed to both behavioral biases and cultural effects. Calvet, Campbell, and Sodini (2007) show that immigrants bear more idiosyncratic risk in their financial portfolios, and Carroll, Rhee, and Rhee (1999), Christelis, Georgarakos, and Haliassos (2013), and Haliassos, Jansson, and Karabulut (2015) document that cultural effects impact immigrant savings rates, leverage, and equity and real estate investments. Our work shows that behavioral and cultural effects might also drive the value tilt.…”