By LARRY SWEDROE
An interesting and important question is: Do traditional gender identity norms constrain women’s influence over financial decision-making in their household?
Da Ke sought to answer the question in his study Who Wears the Pants? Gender Identity Norms and Intra-household Financial Decision-Making, published in the June 2021 issue of the Journal of Finance, in which he explored whether traditional gender norms shape intra-household financial decisions. Ke began by noting: “While married women’s labour force participation has surged from 2% to 73% over the past century, female workers continue to face a gender pay gap of more than 20%. Outside of the workplace, working wives spend an average of 26 hours per week on housework and child care, whereas their husbands spend only half of that amount.”
He drew on micro-data from three U.S. household surveys: (1) the Annual Social and Economic Supplement (ASEC) of the Current Population Survey for the period 1988 to 2018, which included more than two million households; (2) the 5 percent sample of the decennial census from 1980 to 2000, pooled with the American Community Survey conducted by the Census Bureau for the period 2006 to 2015; and (3) the 1992 to 2016 waves of the Health and Retirement Study (HRS), which over the period covered more than 40,000 individuals over the age of 50. In addition, he conducted a randomised controlled experiment in which he recruited close to 4,000 married individuals and randomly primed them with gender identity. He tested whether women choose to suppress their influence at the information contribution stage and whether their influence is downplayed by their husbands at the information aggregation stage.
Following is a summary of his findings:
- 28 percent of the households in which neither spouse worked in finance invested in the stock market. Among households in which one spouse worked in finance, 48 percent of those in which the husband worked in finance participated in the stock market, but only 37 percent of those in which the wife worked in finance participated—a financially sophisticated husband increased the probability of household stock market participation by 70 percent of the average sample probability compared with only about 30 percent for a financially sophisticated wife. The pattern is best explained by gender identity norms, which constrain women’s influence over intra-household financial decision-making.
- Controlling for changes in family income as well as household characteristics prior to the switch, a career switch to finance by the wife increased the probability of household stock market participation by 6 percentage points versus 9 percentage points for men.
- The size of the stock market participation gap established was positively correlated with traditional gender role attitudes:
- The effect was weaker in married couples brought up by working mothers.
- The effect was stronger in families descended from pre-industrial societies in which women specialised in activities within the home.
- The effect was stronger in Southern states, where gender roles are more traditional.
- The effect was stronger in families with active church-goers, whose attitudes toward women tend to be more traditional.
- The effect was stronger in households in which the husband has the final say when it comes to major household decisions — the stock market participation gap was 12.1 percentage points in households in which the husband thinks he has the final say when it comes to major household decisions but just 6.0 percentage points in households in which the husband does not think he has the final say. Similarly, among households in which the wife thinks her husband has the final say, the participation gap was 25 percentage points, whereas the gap was only 15 percentage points among households in which the wife does not think her husband has the final say.
- Female identity hinders idea contribution by the wife — the effect is distinct from a lack of confidence in areas that are stereotypically outside of their gender’s domain.
- The findings were robust to various tests. For example, the gap in stock market participation remained largely the same after controlling for the husband’s risk preference, the wife’s risk preference, the risk preferences of both spouses, and confidence levels.
Ke concluded that both the empirical and experimental evidence he presented demonstrated that “gender identity norms constrain women’s influence over intra-household financial decision-making”. He added: “Consistent with a gender norm-based interpretation, the size of the participation gap is positively associated with traditional gender role attitudes.” In addition, “female identity causes women to be less influential at the information contribution stage of intra-household financial decision-making.”
The first step in addressing any bias is becoming aware of that bias. Ke presented compelling evidence that gender norms do constrain women’s influence over financial decisions in households. This can have significant negative effects in light of the well-documented bias (for example, in the studies Boys Will Be Boys: Gender, Overconfidence and Investment and Patterns of Investor Strategy and Behavior Among Individual Investors) of overconfidence of investment skills in men — overconfidence that leads to excess risk-taking and increased trading, which in turn leads to lower returns.
The information presented herein is for educational purposes only and should not be construed as specific investment, accounting, legal or tax advice. Certain information may be based on third party data which may become outdated or otherwise superseded without notice. Third party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party Web sites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them. The opinions expressed by featured authors are their own and may not accurately reflect those of the Buckingham Strategic Wealth® or Buckingham Strategic Partners® (collectively Buckingham Wealth Partners). LSR-21-113
LARRY SWEDROE is Chief Research Officer at Buckingham Strategic Wealth and the author of numerous books on investing.
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