nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2019‒04‒01
six papers chosen by

  1. Empower the consumer! Energy-related financial literacy and its socioeconomic determinants By Julia Blasch; Nina Boogen; Claudio Daminato; Massimo Filippini
  2. A model-based clustering approach for analyzing energy-related financial literacy and its determinants By Nilkanth Kumar
  3. Energy-related financial literacy and bounded rationality in appliance replacement attitudes: Evidence from Nepal By Massimo Filippini; Nilkanth Kumar; Suchita Srinivasan
  4. “How informal education affects the financial literacy of primary school children developed in a formal educational program" By Flavia Coda Moscarola; Adriaan Kalwij
  5. The impact of financial development on income inequality: a quantile regression approach By Yener Altunbaş; John Thornton
  6. Behavioral anomalies and energy-related individual choices: the role of status-quo bias By Julia Blasch; Claudio Daminato

  1. By: Julia Blasch (Institute for Environmental Studies (IVM), VU University Amsterdam); Nina Boogen (ETH Zurich, Switzerland); Claudio Daminato (ETH Zurich, Switzerland); Massimo Filippini (ETH Zurich, Switzerland)
    Abstract: To be aware of the potential for energy savings in their homes, individuals need specific energy-related and financial knowledge. In addition, they also need the cognitive skills to apply this knowledge, for example when it comes to the calculation of the lifetime cost of household appliances or energy-efficient renovations. This set of knowledge and skills is related to two literacy concepts, i.e. energy and financial literacy. In this paper, we propose a new concept of literacy that we call “energy-related financial literacy”. Further, we present information on the level of financial literacy as well as on the level of energy-related financial literacy for a sample of European households. In the empirical part of the paper we estimate several ordered probit models in order to analyse the determinants of the level of energy-related financial literacy, with a particular interest to understanding the role of gender. Our results show that the level of energy-related financial literacy is relatively low and heterogeneous across the European countries. Moreover, the results confirm previous findings about the gender gap in financial literacy, with males being associated with higher levels of the index. We also identify such a gender gap for energy-related financial literacy.
    Keywords: Energy literacy, financial literacy, energy-related financial literacy, consumer awareness, energy knowledge
    JEL: D12 D91 Q40
    Date: 2018–05
  2. By: Nilkanth Kumar (ETH Zurich, Switzerland)
    Abstract: Recent research highlights the role of consumer’s energy-related financial literacy in adoption of energy efficient household appliances in order to reduce the energy-efficiency gap within the household sector. The computation of an indicator for such a literacy measure has followed a somewhat less refined approach though. This paper demonstrates the use of a model-based clustering strategy in order to differentiate the population based on the level of energy-related financial literacy. Using a Swiss data with 6, 722 respondents, we are able to identify three latent groups that represent low, mid and high levels of literacy. We use this new measure within an ordered logit setting with the goal of explaining the determinants of the level of energy-related financial literacy and compare empirical results using classical indicators and approaches. The empirical findings suggest a significant gender-gap among the Swiss population, i.e. females, even those with university education, are less likely to possess a high level of energy-related financial literacy. Individuals who display strong concern for free-riding on their own energy reduction behavior, are also found to have higher odds of belonging to the low literacy group. The results show that it is possible to identify latent classes that have a general and intuitive meaning and provides support to the model-based clustering approach as a sophisticated alternative. This could be a useful approach when empirical researchers are interested in (attribute-based) latent groups of consumers. The identification of latent classes also provides a possibility to target consumers belonging to these classes with specific policy measures in order to increase their level of literacy.
    Keywords: Model-based clustering, Cluster analysis, Latent class, Energy-related financial literacy, Gender gap, Switzerland
    JEL: C38 D12 D80 Q40
    Date: 2019–02
  3. By: Massimo Filippini (ETH Zurich, Switzerland); Nilkanth Kumar (ETH Zurich, Switzerland); Suchita Srinivasan (ETH Zurich, Switzerland)
    Abstract: Bounded rationality is an example of an important behavioral failure responsible for the energy-efficiency gap, whereby agents under-invest in energy-efficient technologies. One means of addressing this is by improving the energy-related financial literacy of households, which is defined as the combination of energy knowledge and cognitive abilities that are needed in order for agents to take sound decisions with respect to investment in durables. This has been found to improve the ability of agents to calculate the lifetime costs of technologies. The objective of this paper is to evaluate the determinants of energy-related financial literacy of respondents from about 2000 urban households in the Terai region of Nepal, and to analyze whether this ability has an effect on replacement attitudes of households regarding inefficient technologies. Using a novel household survey data, we find that respondents have low levels of energy-related financial literacy. While we find differences in the role of some socio-economic determinants of energy-related financial literacy compared to previous studies from developed countries, we also find certain common results, such as female respondents having lower scores. Additionally, we find that higher levels of energy-related financial literacy, especially stronger computational abilities, lead to more rational attitudes with regards to replacement of old appliances. As development has brought, and continues to bring, more households in low and middle-income countries (LMICs) closer to technologies of their liking, ensuring the adoption of energy-efficient technologies may be critical for ensuring sustainable development in the decades to come, and higher energy-related financial literacy may be one means of achieving that.
    Keywords: Bounded rationality, Energy literacy, Financial literacy, Households, Nepal
    JEL: D12 D80 Q41 Q48
    Date: 2019–03
  4. By: Flavia Coda Moscarola (CeRP-Collegio Carlo Alberto and Compagnia di San Paolo); Adriaan Kalwij (Utrecht University School of Economics)
    Abstract: This paper examines the role of informal financial education provided by parents in supplementing, and possibly improving the effect of formal financial education programs for primary school children in Italy. We report on a case study of the Money Learning (MOLE) project, an initiative of the Museum of Saving in Turin. In line with previous studies, we find that formal financial education has a positive effect on the financial literacy of primary school children. New empirical findings suggest that this effect of formal financial education can be reinforced by parents providing informal financial education (e.g. giving pocket money and freedom to spend it).
    Date: 2018–07
  5. By: Yener Altunbaş (Bangor University); John Thornton (Office of Technical Assistance, US Department of the Treasury; Bangor University)
    Abstract: In a panel of 121 countries, financial development increases income inequality in high- and lower- income countries across inequality quantiles but promotes greater inequality in upper-middle-income countries. Financial development appears to impact financial inclusion for the poor and rich differently as a country’s income level changes.
    Keywords: Income inequality; Financial development; Quantile regression
    JEL: D31 D63 F02 O11 O15
    Date: 2019–02
  6. By: Julia Blasch (Institute for Environmental Studies (IVM), VU University Amsterdam); Claudio Daminato (ETH Zurich, Switzerland)
    Abstract: The literature on the energy-efficiency gap discusses the status-quo bias as a behavioral anomaly that potentially increases the energy consumption of a household through at least three channels: (1) by making consumers keep their energy-using durables as long as possible, until wearout forces them to replace their equipment (2) by making consumers choose new energy-using durables that resemble the existent ones that need replacement, and (3) by making consumers overuse appliances in an attempt to mentally amortize the initial investment cost. The results presented in this study are an attempt to empirically investigate the extent to which the presence of a bias towards the status quo is linked to residential electricity consumption through two out of the above mentioned three channels: non-replacement of old appliances and overuse of appliances. Using data from a large household survey conducted in three European countries, we find that our measure of status-quo bias is a significant predictor of both the age of home appliances as well as the level of consumption of energy services of a household. The tendency of status-quo biased individuals to keep their appliances longer and to use them more intensely is also reflected in the total electricity consumption of their households, which is found to be around 5.7% higher than for households of non-biased individuals. This research thus provides some first empirical evidence that the status-quo bias has the potential to create a substantial barrier to increasing residential energy efficiency. Our findings prompt policy makers to design instruments that take this barrier into account.
    Keywords: status-quo bias; loss aversion; appliances replacement; residential energy consumption; energy-related financial literacy
    JEL: D12 D91 Q41 Q50
    Date: 2018–10

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