nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2018‒05‒07
two papers chosen by
Viviana Di Giovinazzo
Università degli Studi di Milano-Bicocca

  1. Financial education for the disadvantaged? A review By Entorf, Horst; Hou, Jia
  2. Does Financial Literacy Improve Financial Inclusion? Cross Country Evidence By Grohmann, Antonia; Klühs, Theres; Menkhoff, Lukas

  1. By: Entorf, Horst; Hou, Jia
    Abstract: In contrast to the popularity of financial education interventions worldwide, studies on the economic effects of those interventions report mixed results. With a focus on the effect on disadvantaged groups, we review both the theoretical and empirical findings in order to understand why this discrepancy exists. The survey first highlights that it is necessary to distinguish between the concepts of, and the relationships between, financial education, financial literacy and financial behavior to identify the true effects of financial education. The review addresses possible biases caused by third factors such as numeracy. Next, we review theories on financial literacy which make clear that the effect of financial education interventions is heterogeneous across the population. Last, we look closely at main empirical studies on financial education targeted at the migrants/immigrants, the low-income earners and the young, and compare their methodologies. There seems to be a positive effect on short-term financial knowledge and awareness of the young, but there is no proven evidence on long-term behavior after being grown up. Studies on financial behavior of migrants and immigrants show almost no effect of financial education.
    Keywords: Financial Education,Financial Literacy,Inequality,Program Evaluation
    JEL: G28 I24 I25 I28
    Date: 2018
  2. By: Grohmann, Antonia (DIW Berlin); Klühs, Theres (Leibniz Universität Hannover); Menkhoff, Lukas (DIW Berlin and Humboldt Universität Berlin)
    Abstract: While financial inclusion is typically addressed by improving the financial infrastructure, we show that a higher degree of financial literacy also has a clear beneficial effect. We study this effect at the cross-country level, which allows us to consider institutional variation. Regarding \"access to finance\", financial infrastructure and financial literacy are mainly substitutes. However, regarding the \"use of financial services\", the effect of higher financial literacy strengthens the effect of more financial depth. The causal interpretation of these results is supported by IV-regressions. Moreover, the positive impact of financial literacy holds across income levels and several subgroups within countries.
    Keywords: financial inclusion; financial literacy; financial institutions; financial development;
    JEL: G02
    Date: 2018–04–26

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