The influence and mechanism of female-headed households on household debt risk: empirical evidence from China

The rising number of female-headed households globally, driven by societal progress and gender equality initiatives, necessitates understanding their impact on household financial well-being. While research exists on the correlation between female-headed households and poverty, food security, and asset ownership, studies on their relationship with household debt are limited. This study addresses this gap by focusing on China, a nation experiencing rapid economic growth and rising household debt levels, posing significant risks to financial stability. The research question is whether female-headed households influence household debt risk, and if so, what mechanisms are at play. Given women's generally perceived risk-averse nature and asset allocation preferences, the study hypothesizes that female-headed households will reduce household debt risk. Understanding this relationship is crucial for informing policies aimed at reducing household debt and promoting gender equality.

The literature review examines two key areas: the influence of gender characteristics on debt and the factors influencing household debt. Regarding gender's impact on debt, research on corporate debt shows mixed results, with some studies suggesting female executives reduce corporate debt levels due to more rational financing decisions, while others indicate the opposite. Research on household debt reveals inconsistent conclusions on the debt levels of male- versus female-headed households, partially due to differing debt measurement standards. However, studies generally agree that female household heads are more risk-averse and cautious, influencing their debt behavior. Concerning factors affecting household debt, income, demographic structure, financial literacy, and future expectations all play significant roles, with high-income households potentially incurring more debt due to better access to credit. Macroeconomic factors such as housing market dynamics and economic conditions also significantly influence household debt. This paper contributes to the literature by examining the specific influence of female-led financial decision-making on household debt risk from the perspective of female-headed households, addressing the gap in research on the underlying mechanisms.

This study utilizes data from the 2019 CHFS, a nationally representative survey of Chinese households. After data cleaning and winsorization to handle outliers, the final sample includes 20,919 households. The dependent variable is household debt risk, measured by the debt-to-income ratio (total household debt divided by total household income). The key explanatory variable is a binary indicator of female-headed households, defined as households where the female has the dominant decision-making power concerning family affairs. Mediating variables include risk aversion (measured by a binary variable based on investment preference questions in the survey) and housing property holding (measured as the proportion of housing assets in total assets). Control variables encompass individual characteristics (age, education, health of household heads), family characteristics (family size, social security and medical insurance participation, homeownership, consumption expenditure, savings assets, internet use), and regional characteristics (urban/rural background, geographic region). Due to the truncation of the debt-to-income ratio at zero, a Tobit regression model is employed as the benchmark. To address endogeneity concerns, the study employs instrumental variables (IV) regression, using the female household head rate in the same community as an instrument. Propensity score matching (PSM) is also used to correct for potential selection bias. Further robustness checks involve using the asset-liability ratio as an alternative measure of debt risk, employing OLS regression, and controlling for provincial fixed effects. Mediation analysis is conducted using a process model to assess the roles of risk aversion and housing property holding. Finally, heterogeneity analysis is performed to examine variations in the relationship based on urban development levels and family population structure.

The benchmark Tobit regression reveals that female-headed households significantly reduce household debt risk (a 14.29 percentage point decrease). This finding persists even after controlling for various individual, family, and regional factors, and is robust across alternative specifications and methodologies. The IV regression confirms the negative association, addressing endogeneity concerns. PSM further supports the finding, with consistent negative effects across different matching methods, and a sensitivity analysis suggests that unobservable confounding factors are unlikely to significantly affect the results. The treatment effect model similarly shows a significant negative effect. Mediation analysis demonstrates a partial mediating effect of risk aversion; female-headed households are more risk-averse, and risk aversion, in turn, is negatively related to debt risk. Conversely, housing property holding has a masking effect; female-headed households tend to hold more housing assets, which increases debt risk, partially offsetting the negative effect of risk aversion. Heterogeneity analysis indicates a stronger negative relationship between female-headed households and debt risk in third-tier cities and below. The impact is also more significant in families without children and in those with multiple elderly members. Robustness checks, including using the asset-liability ratio as a dependent variable and employing OLS regression, yielded consistent results.

The findings directly address the research question, confirming that female-headed households significantly reduce household debt risk in China. The results highlight the importance of female participation in family financial decision-making and its contribution to financial stability. The mediating roles of risk aversion and housing property holding provide valuable insights into the underlying mechanisms. The risk-averse behavior of female heads likely leads to more cautious debt management, while the increased holding of housing assets, though potentially risky, might reflect a preference for secure investments. The heterogeneity analysis suggests that the effectiveness of female-headed households in mitigating debt risk depends on contextual factors like urban development level and family structure. Policy implications include promoting financial literacy among women and supporting initiatives that improve financial access and infrastructure, particularly in less developed areas.

This study demonstrates that female-headed households significantly reduce household debt risk in China, primarily through risk-averse financial behavior. While increased housing asset holding can partially offset this effect, the overall impact remains strongly negative. Heterogeneity analysis reveals context-dependent effects. Future research could investigate the dynamic effects of female-headed households on debt accumulation over time using panel data and explore the influence of specific types of debt and assets on this relationship.

This study relies on cross-sectional data, limiting insights into the dynamic interplay between female-headed households and debt risk over time. The measures of debt risk, while common, do not fully capture the complexity of household financial situations, and future studies might incorporate more detailed measures of asset and liability composition. The definition of 'female-headed household' relies on survey data, and further investigation might be needed to validate this definition. Finally, unobserved confounding factors may exist.