Learning from neighbors: Peer effects in Chinese household financial investments

This paper employs nationally representative survey data from China to examine peer effects in the investment behaviors of Chinese households with respect to wealth management products. Our empirical findings indicate that neighbors' behaviors have a statistically significant impact on investments in these financial products. These peer effects exist at both the extensive and intensive margins, even in situations where households cannot observe their peers' investment behaviors due to incomplete information. Heterogeneity analyses suggest that the underlying mechanism driving these effects may be the spread of financial information and knowledge. Additionally, we observe that the rise in the participation rate in wealth management product investments is linked to a reduction in inequality. Accordingly, our findings propose that policymakers could leverage peer effects from influencers to promote household investments, thereby contributing to the mitigation of inequality.