nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2020‒11‒23
eight papers chosen by

  1. Information and Communication Technology Diffusion and Financial Inclusion: An Interstate Analysis for India By Amrita Chatterjee; Simontini Das
  2. Finance, Gender, and Entrepreneurship: India's Informal Sector Firms By Gang, Ira N.; Natarajan, Rajesh Raj; Sen, Kunal
  3. Financial literacy, risk and time preferences – Results from a randomized educational intervention By Matthias Sutter; Michael Weyland; Anna Untertrifaller; Manuel Froitzheim
  4. Finance, gender, and entrepreneurship: India's informal sector firms By Ira N. Gang; Rajesh Raj Natarajan; Kunal Sen
  5. Are incentivized old-age savings schemes effective under incomplete rationality? By Tyrowicz, Joanna
  6. Stereotypes in Financial Literacy: Evidence from PISA By Laura Bottazzi; Annamaria Lusardi
  7. The polarizing impact of numeracy, economic literacy, and science literacy on attitudes toward immigration By Lucia Savadori; Giuseppe Espa; Maria Michela Dickson
  8. How relevant are economic preferences and personality traits for individual sustainable investment behavior? A framed field experiment By Gutsche, Gunnar; Wetzel, Heike; Ziegler, Andreas

  1. By: Amrita Chatterjee (Assistant Professor, Madras School of Economics); Simontini Das (Assistant Professor, Jadavpur University, Kolkata: 700032)
    Abstract: Financial Inclusion has its primary objective in providing access to useful and affordable financial products and services that meet the needs of so far unbanked population for transactions, payments, savings, credit and insurance in a responsible and sustainable way. The penetration of banking services in India has made reasonable progress though there are still regional disparities with especially the rural and female population lagging behind. However, not only access but also usage of financial services matters. Moreover, as there is a strong initiative towards digitalized cashless economy in India, it is important to examine whether the country is ready for a more technology-driven financial system. As far as the diffusion of telecommunication technology is concerned, India has made a remarkable progress in urban areas giving rise to significant digital divide between rural and urban India. With spread of mobile and mobile internet though, this divide has come down to some extent. Thus if this inclination towards mobile technology can be properly channelized to improve the access as well as usage of financial services through spread of mobile banking then more and more people can be brought under the purview of institutional credit system leading to reduction in poverty and inequality. The current paper intends to study the role of information and communication technology (ICT) diffusion in improving the status of financial inclusion across the different states of India. Two separate indices for Financial Inclusion and Information Technology Diffusion are formed and the states are clustered to club the states similar in terms of their performance. Then the paper tries to test whether ICT diffusion is one of the indicators of Financial Inclusion in India. The dynamic panel data analysis helped us to identify the role of technology as well as other socio-economic factors which can contribute in interstate disparities in FI. The results show that technology does play an important role in improving financial inclusion. As the elderly people in rural as well as urban areas are still not that familiar with mobile and internet, they may not be able to get benefited by ICT revolution. But lack of education and more importantly poor status of financial literacy play a very vital role in FI
    Keywords: Financial Inclusion, Information and Communication Technology Diffusion, Dynamic Panel Data Model
    JEL: L86 L96 C23 G21
  2. By: Gang, Ira N. (Rutgers University); Natarajan, Rajesh Raj (Sikkim University); Sen, Kunal (University of Manchester)
    Abstract: How does informal economic activity respond to increased financial inclusion? Does it become more entrepreneurial? Does access to new financing options change the gender configuration of informal economic activity and, if so, in what ways and what directions? We take advantage of nationwide data collected in 2010/11 and 2015/16 by India's National Sample Survey Office on unorganized (informal) enterprises. This period was one of rapid expansion of banking availability aimed particularly at the unbanked, under-banked, and women. We find strong empirical evidence supporting the crucial role of financial access in promoting entrepreneurship among informal sector firms in India. Our results are robust to alternative specifications and alternative measures of financial constraints using an approach combining propensity score matching and difference-in-differences. However, we do not find conclusive evidence that increased financial inclusion leads to a higher likelihood of women becoming entrepreneurs than men in the informal sector.
    Keywords: entrepreneurship, financial constraints, gender, informal sector, difference-in-differences, India
    JEL: O12 G28 L26
    Date: 2020–11
  3. By: Matthias Sutter (Max Planck Institute for Research on Collective Goods, Bonn); Michael Weyland; Anna Untertrifaller; Manuel Froitzheim
    Abstract: We present the results of a randomized intervention in schools to study how teaching financial literacy affects risk and time preferences of adolescents. Following more than 600 adolescents, aged 16 years on average, over about half a year, we provide causal evidence that teaching financial literacy has significant short-term and longer-term effects on risk and time preferences. Compared to two different control treatments, we find that teaching financial literacy makes subjects more patient, less present-biased, and slightly more risk-averse. Our finding that the intervention changes economic preferences contributes to a better understanding of why financial literacy has been shown to correlate systematically with financial behavior in previous studies. We argue that the link between financial literacy and field behavior works through economic preferences. In our study, the latter are also related in a meaningful way to students’ field behavior.
    Keywords: Financial literacy, randomized intervention, risk preferences, time preferences, field experiment
    JEL: C93 D14 I21
    Date: 2020–08
  4. By: Ira N. Gang; Rajesh Raj Natarajan; Kunal Sen
    Abstract: How does informal economic activity respond to increased financial inclusion? Does it become more entrepreneurial? Does access to new financing options change the gender configuration of informal economic activity and, if so, in what ways and what directions? We take advantage of nationwide data collected in 2010/11 and 2015/16 by India's National Sample Survey Office on unorganized (informal) enterprises. This period was one of rapid expansion of banking availability aimed particularly at the unbanked, under-banked, and women.
    Keywords: Entrepreneurship, Financial constraints, Gender, Informal sector, Difference-in-difference, India
    Date: 2020
  5. By: Tyrowicz, Joanna
    Abstract: Financing consumption of the elderly in the face of the projected increase in life expectancy is a key challenge for economic policy. Moreover, standard structural models with fully rational agents suggest that about 50-60 percent of old-age consumption is financed with voluntary savings, even in the presence of a fairly generous public pension system. This is clearly inconsistent with either the data, or the alarming simulations of old-age poverty in the years to come. Oldage saving (OAS) schemes are widely used policy instruments to address this challenge, but structural evaluations of such instruments remain rare. We develop a framework with incompletely rational agents: lacking financial literacy and experiencing commitment difficulties. We study a broad selection of OAS schemes and find that they raise welfare of financially illiterate agents and to a lesser extent improve welfare of agents with a high degree of time inconsistency. They also reduce the incidence of poverty at old age. Unfortunately, these instruments are fiscally costly, induce considerable crowd-out and direct fiscal transfers mostly to those agents, who need it the least.
    Keywords: old-age savings,incomplete rationality,welfare effects
    JEL: H31 H55 I38
    Date: 2020
  6. By: Laura Bottazzi; Annamaria Lusardi
    Abstract: We examine gender differences in financial literacy among high school students in Italy using data from the 2012 Programme for International Student Assessment (PISA). Gender differences in financial literacy are large among the young in Italy. They are present in all regions and are particularly severe in the South and the Islands. Combining the rich PISA data with a variety of other indicators, we provide a thorough analysis of the potential determinants of the gender gap in financial literacy. We find that parental background, in particular the role of mothers, matters for the financial knowledge of girls. Moreover, we show that the social and cultural environment in which girls and boys live plays a crucial role in explaining gender differences. We also show that history matters: Medieval commercial hubs and the nuclear family structure created conditions favorable to the transformation of the role of women in society, and shaped gender differences in financial literacy as well.
    Date: 2020–11
  7. By: Lucia Savadori; Giuseppe Espa; Maria Michela Dickson
    Abstract: Political orientation polarizes the attitudes of more educated individuals on controversial issues. A highly controversial issue in Europe is immigration. We found the same polarizing pattern for opinion toward immigration in a representative sample of citizens of a southern European middle-size city. Citizens with higher numeracy, scientific and economic literacy presented a more polarized view of immigration, depending on their worldview orientation. Highly knowledgeable individuals endorsing an egalitarian-communitarian worldview were more in favor of immigration, whereas highly knowledgeable individuals with a hierarchical-individualist worldview were less in favor of immigration. Those low in numerical, economic, and scientific literacy did not show a polarized attitude. Results highlight the central role of socio-political orientation over information theories in shaping attitudes toward immigration.
    Date: 2020–11
  8. By: Gutsche, Gunnar; Wetzel, Heike; Ziegler, Andreas
    Abstract: This paper analyzes the determinants of socially responsible investing (SRI) at the individual investor level. We examine data from an incentivized framed field experiment, which was part of a survey among a representative sample of financial decision makers in German households. Thus, we provide a new approach to elicit preferences for SRI. We further extend the set of potential determinants of SRI and consider all economic preferences according to Falk et al. (2018) and the Big Five personality traits. The analysis reveals that these factors are only of minor relevance in comparison to financial literacy, environmental values, and social norms.
    Keywords: Socially responsible investing,economic preferences,personality traits,framed field experiment
    JEL: G11 Q56 G02 A12 A13
    Date: 2020

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