The Impact of Changes in Family Structure on Individuals’ Financial Risk Attitudes: A longitudinal analysis from the Netherlands

Abstract: Risk attitudes influence a wide range of financial decisions in the household, such as investments, consumption, and savings. It is, therefore, crucial to understand risk attitudes and how they change throughout the life cycle, in order to determine and predict economic behavior. In this study, we investigate the impact of changes in family structure on individuals' financial risk attitudes by using longitudinal data from De Nederlandsche Bank Household Survey, DHS. The data set consists of individuals from the Netherlands and is stretching over the time period from 1993 to 2021. The family transitions considered in this study are getting married, forming a domestic partnership, entering parenthood, children leaving the household, getting divorced, separating from a partner, and entering widowhood. Fixed effects regressions are conducted to estimate the effect of these life events on financial risk attitudes. Some of the studied life events show a significant impact on individuals' risk attitudes. More precisely, we find that getting divorced and entering widowhood are associated with a decrease in financial risk aversion among men. Similar results are found when an individual is separating from a partner. This negative effect is most pronounced among women. The sensitivity analysis, however, shows no significant effects. Consequently, we cannot conclude that there are any changes in risk attitude when an individual experiences a certain life event.