Female Financial Portfolio Choices and Marital Property Regimes

This paper studies the relationship between married couples’ portfolio choices and property division rules. Using rich household survey data, we exploit the regional variation in marital laws across Spain to estimate the causal effects of property division rules on household financial investment. We find that separate-property couples hold riskier financial portfolios than community-property ones when wives take charge of the household finances. To understand this gap in risky asset holdings, we develop a financial portfolio choice model where couples are subject to divorce risk but differ in their property division regimes and the gender of the spouse making the financial decisions. A model in which the costs of dissolving a community property regime in the event of divorce are sufficiently high for women is likely to replicate the empirical estimates. High dissolution costs of marital assets upon divorce reduce spouses’ future disposable income in the event of divorce, encouraging precautionary savings in the form of safe assets during marriage as compared with their separate-property counterparts who bear no cost. Greater transfers of savings between couples in divorce attenuate this mechanism, while lower income levels reinforce it.