Household Financial Decisions, the Role of Child Gender and Background Risk

We investigate the role of child gender in financial responses to shocks among households in China, where having a son has deep historical cultural roots, especially in rural areas. Specifically, we compare investment and savings decisions between families with daughters and those with sons in both rural and urban settings by leveraging two quasi-natural experiments: land expropriation and housing demolition in China. Land expropriation primarily affects rural households, while housing demolition predominantly impacts urban households, offering a comparative lens to understand how households adjust financial porfolios under different contexts. We find that expropriation with hukou changes increases stock investments and reduces savings rates for rural households with a daughter relative to those with a son. In urban areas, households with a daughter are also more likely to invest in the stock market following housing demolition, but their savings rates remain unchanged. Our findings reveal the differential impact of child gender on household financial decisions following background risk shocks (expropriation) and wealth shocks net of background risk changes (demolition). JEL Classification: D14, G11, H13, J16