Hormone Levels Influence Demand for Financial Services

New findings by HSE researchers indicate that prenatal testosterone exposure can influence an individual's financial behaviour, such as the use of bank cards, deposit accounts, loans and insurance.

Study Authors:

Maria Semenova, Senior Research Fellow at International Research Laboratory for Institutional Analysis of Economic Reforms of HSE Center for Institutional Studies.

Irina Andrievskaya, Research Fellow of the HSE International Research Laboratory for Institutional Analysis of Economic Reforms of HSE Center for Institutional Studies.

The integration of economics and biology is an emerging trend in 21st century science. A number of studies were published in the early 2000s exploring the effects of psycho-physiological variables, such as hormone levels, on individual performance in various fields. Several papers [Manning, JT et all, 2004; McFadden, D., Shubel, E., 2002] have associated the ratio of second digit (index finger) to fourth digit (ring finger) length (2D:4D ratio) with exposure to prenatal testosterone, the male hormone produced by the maternal body and influencing the foetal development.

More recently, researchers worldwide have demonstrated various correlations between the 2D:4D ratio and certain psycho-physiological and social aspects of human behaviour, such as risk appetite or academic achievement.

According to Andrievskaya and Semenova, prenatal testosterone exposure can determine personal demand for financial services such as bank cards, deposits, loans and insurance, later in life.

Their paper Does biological endowment matter for demand for financial services? Evidence from 2D:4D ratio in the Russian household survey is published in Personality and Individual Differences (Vol.104 (2017) pp. 155–165).

The study is based on data from the 21th wave of RLMS-HSE, which also measured 2D:4D ratios. The sample includes 4,438 respondents aged 18 to 70 from Moscow and the Moscow Region.

The respondents completed a standard questionnaire containing, inter alia, questions about education, income and use of banking services. At the time of filling out the questionnaire, digit ratios of randomly selected respondents were measured using an electronic calliper.

Semenova and Andrievskaya found that men and women use financial services in different ways and that women's financial behaviour is more often correlated with prenatal testosterone (PT) exposure levels.

Women with lower PT levels (higher 2D:4D ratios for right and left hand) are more likely to hold bank deposits and to apply for loans; they are also more likely to use bank cards. Men with higher PT levels tend to report their intention to take out a loan more often but are less likely to use bank cards.

Individuals living an active life and who are perhaps more prone to risks tend to use insurance products more often. The researchers found that women with higher PT levels were more likely to insure property and buy life insurance.

According to Semenova and Andrievskaya, the effect of variations in the 2D:4D ratio is not only statistically significant but correlates with substantial differences in demand for financial services. For example, an increase in 2D:4D ratio by one standard deviation lowers by 3.4% the likelihood of applying for a loan for men, but increases it by 2%-2.3% for women.

For women, adding one standard deviation to the minimum 2D:4D ratio lowers by 20% the likelihood of using bank cards for transactions and increases by more than 12.5% the chances of buying property insurance.

According to the authors, understanding the biological factors which influence demand can benefit financial service providers, e.g. by helping them target their products and advertising to the right audiences, thereby expanding the customer base of banks and insurance companies and eventually contribute to advancing Russia's financial sector. It is particularly important given the country's relatively low level of financial inclusion: Russia ranks 90 out of 142 countries in loan penetration, 83 in savings penetration, 62 in bank account penetration, and 52 in debit card penetration (World Bank Financial Inclusion Index, 2014).