Spending or saving? Female empowerment and financial decisions in a matrilineal society

Abstract

• A historical shift in female empowerment allows us to assess whether empowered women make different financial decisions. • The distance to the former British base in Cherrapunji is used as an instrument for female empowerment. • We use self-collected data of 650 individuals living in the matrilineal state of Meghalaya, India. • Culturally empowered women spend more on welfare-enhancing goods, but this comes at the expense of savings. • Higher investments in human capital and lower savings have important implications for long-run economic growth. This paper looks at household consumption and financial decisions made in a matrilineal society where women are traditionally the household financial managers. This culture was strongly altered by the British in the mid-19th century through Christian missionaries who proclaimed that the role of the household manager is ascribed to men and not to women. Using self-collected data from 650 individuals in the matrilineal state of Meghalaya, India, and exploring households’ distance to the historical Protestant base in Cherrapunji, we find evidence that households in which women are empowered spend more on welfare-enhancing goods, such as food, but are less likely to have savings left at the end of the month. Our paper contributes to the literature by investigating how a historical shift in female empowerment, mostly driven by cultural norms, can have long-term effects on financial decisions.