Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 285: Incompatible European Partners? Cultural Predispositions and Household Financial Behavior

Michael Haliassos (), Thomas Jansson () and Yigitcan Karabulut ()
Additional contact information
Michael Haliassos: Goethe University Frankfurt, Postal: Department of Money and Macroeconomics, House of Finance, Grueneburgplatz 1, PF H32, 60323 Frankfurt am Main, Germany
Thomas Jansson: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Yigitcan Karabulut: Goethe University Frankfurt, Postal: Department of Money and Macroeconomics, House of Finance, Grueneburgplatz 1, PF H32, 60323 Frankfurt am Main, Germany

Abstract: The Eurozone fiscal crisis has created pressure for institutional harmonization, but skeptics argue that cultural predispositions can prevent convergence in behavior. Our paper derives a robust cultural classification of European countries and utilizes unique data on natives and immigrants. Classification based on genetic distance or on Hofstede’s cultural dimensions fails to identify a single ‘southern’ culture but points to a ‘northern’ culture. Our findings support the relevance of cultural predispositions for financial behavior; and convergence of behavior over time in the face of common institutions, even for countries with great cultural distance from the country that created those institutions.

Keywords: Household Portfolios; Household Finance; Cultural Influences on Economic Behavior

JEL-codes: E21; G11

48 pages, First version: June 1, 2014. Revised: January 1, 2015.

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