Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/222606
Authors: 
Hubar, Sylwia
Koulovatianos, Christos
Li, Jian
Year of Publication: 
2020
Series/Report no.: 
CFS Working Paper Series No. 640
Abstract: 
In fifteen European countries, China, and the US, stocks and business equity as a share of total household assets are represented by an increasing and convex function of income/wealth. A parsimonious model fitted to the data shows why background labor-income risk can explain much of this risk-taking pattern. Uncontrollable labor-income risk stresses middle-income households more because labor income is a larger fraction of their total lifetime resources compared with the rich. In response, middle-income households reduce (controllable) financial risk. Richer households, having less pressure, can afford more risk-taking. The poor take low risk because they avoid jeopardizing their subsistence consumption.
Subjects: 
background risk
household-portfolio shares
business equity
subsistence consumption
wealth inequality
JEL: 
G11
D91
D81
D14
D11
E21
Document Type: 
Working Paper

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