Culture, Liquid Assets and La Dolce Villa: Portfolio Choice of Immigrants


Can cultural differences explain differences in household portfolios? We answer this question by studying the portfolio choices of immigrant communities using data from the Household Finance and Consumption Survey (HFCS) and the European and World Value Studies (EVS and WVS). Having access to non-anonymized information on country of birth in the HFCS, we can compare the portfolios of immigrants from a large set of countries. Hence, we can isolate the influence of culture and (endogenous) institutions on financial decisions related to precautionary behavior and risk taking. As differential European home-ownership rates have profound reflections in household portfolios, we put particular emphasis on housing tenure decision in our investigation. Our findings indicate that variation in cultural norms, such as trust in public and private institutions, is associated with different amounts of precautionary savings and alters the probability to take on financial risk for the purpose of becoming a homeowner. These results are robust across a range of econometric specifications.