Fertility Behavior and Risky Financial Asset Allocation: A Household-Level Analysis

Building on a theoretical framework, we examine how fertility behavior affects household risky financial asset allocation using microdata from the 2016, 2018, and 2020 waves of the China Family Panel Studies (CFPS). Fertility behavior is characterized along two sequential dimensions: the decision to have children and the decision to continue childbearing. We find that: (1) Choosing to have children significantly increases households’ participation in risky financial markets, whereas continuing to have children significantly reduces both the probability of participation and the share of risky financial assets held. These findings remain robust across a series of robustness checks. (2) The effects exhibit substantial heterogeneity across urban-rural areas, intergenerational support arrangements, housing liabilities, and household characteristics, including education, asset holdings, and child gender composition. (3) Human capital investment and the income penalty serve as key mediating mechanisms. Specifically, choosing to have children increases household investment in education and healthcare and encourages risk-taking, while continuing childbearing reduces per capita income and constrains participation in risky financial assets. (4) Birth spacing emerges as an important temporal factor: longer intervals between successive births alleviate the financial pressures associated with childbearing and promote greater risk-taking in household portfolios.