Population ageing and household risk aversion

This note provides an empirical analysis on how the worldwide trend of population ageing affects household's risk preferences and financial behaviours such as investing decisions. Using Chinese household survey data, we study how household's risk attitudes are affected by the relative number of elderly people (age ≥65) in the family. The main empirical finding is that the rise of the relative number of aged people in the household significantly increases the conditional probability of the household's being risk averse. When there are more aged people in the household, the household is more likely to be against any form of risks when making investments and prefer risk-free asset. We also find that the increase of the relative number of aged people in the family has a larger marginal effect on the household risk preference when the society is in transit from a younger age structure to an older one. Since household risk preferences have impacts over many economic variables, such as consumption, asset returns and long-run economic growth, our findings provide a new perspective on the potential mechanism through which population ageing affects the economy.