Asset allocation and market participation are intimately related investment decisions. Studies of dividend clienteles often attribute the positive relation between age and dividends to lack of self-control, but consumers with self-control problems are precisely those less likely to hold securities. Using data from the Consumer Expenditure Survey (CEX), I model market participation and dividend preferences jointly and find evidence of self-selection bias in traditional regressions linking dividend preferences to investors' demographics. The positive relation between dividends and age is likely due to life-cycle considerations rather than to lack of self-control.
