Household income and financial decision-making analysis in regions of Slovakia

Abstract

The presented paper deals with the financial decision-making of households in the regions of
Slovak Republic. Households in the Slovakia are generally perceived as conservative in terms of investment
behavior and are characterized by increased risk aversion from the perspective of both EU and OECD
member countries, holding a significant amount of their financial resources in the form of deposits in bank
accounts. The main objective of the paper is to estimate the differences between regions in the share of
household participation in financial markets. Our hypothesis is that households with higher incomes are
less risk averse and invest more funds in stocks that exhibit a higher degree of risk. Through statistical
methods and data obtained from the Statistical Office of the Slovakia and the Household Finance and
Consumption Survey (HFCS) from 2014, 2017 and 2021 conducted by the ECB with the assistance of the
National Bank of Slovakia, we demonstrate, that the Bratislava region has the highest share of households
investing in shares, which is due to the economic maturity of the region and higher incomes of the
population, as there is a positive correlation and linear relationship between household income (expressed
through regional GDP per capita, gross income of households, and disposable income of households) and
the share of households investing in shares. The demonstrated results are therefore beneficial for economic
policy makers and justify the need to mitigate regional disparities between regions to increase households'
participation in the financial market and consequently increase economic growth in the future.