Working Paper: CEPR ID: DP14502
Authors: Francisco J. Gomes; Michael Haliassos; Tarun Ramadorai
Abstract: Household financial decisions are complex, interdependent, and heterogeneous, and central to the functioning of the financial system. We present an overview of the rapidly expanding literature on household finance (with some important exceptions) and suggest directions for future research. We begin with the theory and empirics of asset market participation and asset allocation over the lifecycle. We then discuss household choices in insurance markets, trading behavior, decisions on retirement saving, and financial choices by retirees. We survey research on liabilities, including mortgage choice, refinancing, and default, and household behavior in unsecured credit markets, including credit cards and payday lending. We then connect the household to its social environment, including peer effects, cultural and hereditary factors, intra-household financial decision making, financial literacy, cognition and educational interventions. We also discuss literature on the provision and consumption of financial advice.
Keywords: household finance
JEL Codes: G50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| household financial decisions (G50) | macroeconomic outcomes (E66) |
| household financial decisions (G50) | asset price determination (G19) |
| income and wealth inequality (D31) | household financial decisions (G50) |
| defined contribution pension plans (J32) | household investment behaviors (D14) |
| technological advancements (O33) | understanding of causal relationships in household finance (G59) |