Public Policy Spring 2017 Research Seminar with Christian Weller
Women’s Economic Risk Exposure and Savings
Wealth inequality by gender has stayed persistently high. Retirement is the primary reason for people to save and women are less likely than men to have enough saved to maintain their standard of living in retirement. As a result, women are more likely than men to live in poverty in old age. One common explanation for this inequality is that women choose to take on less economic risk exposure through stock market investments and thus have fewer opportunities for high returns on their earnings. This narrow view of gender differences in risk exposure, though, ignores potential gaps in exposure to other economic risks. Women and men can face additional risks beyond the stock market in the labor market, the housing market, through business ownership and through caregiving responsibilities. In each case, people face potentially substantial losses of income and savings if things go wrong. Widespread risk exposure can then impede savings whenever risks materialize, so that people actually not just potentially lose money, for instance, lost earnings because of unexpected caregiving requirements. Moreover, the fear of such losses from exposure to several economic risks can lead people to avoid making decisions to protect themselves, for instance, by saving more or by buying less risky investments. Either way, widespread risk exposure, especially to hard-to-avoid risks in the labor market and through caregiving, can lower people’s savings. This paper summarizes our results for risk exposure and savings by gender, showing that women have more risk exposure than men and that risk exposure is connected to lower savings, especially for women who face hard to avoid risks in the labor market.
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