nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2021‒05‒03
nine papers chosen by

  1. Financial Education Affects Financial Knowledge and Downstream Behaviors By Kaiser, Tim; Lusardi, Annamaria; Menkhoff, Lukas; Urban, Carly
  2. Determinants of Peer-to-Peer Lending Expansion: The Roles of Financial Development and Financial Literacy By Oh, Eun Young; Rosenkranz, Peter
  3. No Men, No Cry? How Gender Equality in Access to Credit Enhances Financial Stability By Caroline PERRIN; Laurent WEILL
  4. Is Mobile Money Changing Rural Africa? Evidence from a Field Experiment By Catia Batista; Pedro C. Vicente
  5. Financial Education in Schools: A Meta-Analysis of Experimental Studies By Kaiser, Tim; Menkhoff, Lukas
  6. Financial Literacy and Intra-Household Decision Making: Evidence from Rwanda By Grohmann, Antonia; Schoofs, Annekathrin
  7. Strategies for Addressing Financial Literacy Within Personal Responsibility and Education Programs (PREP) By Katie Eddins; Elizabeth Clary
  8. Do High Schools Choose Financial Education Policies Based on Their Neighbors? By Luedtke, Allison Oldham; Urban, Carly
  9. Do retail investors bite off more than they can chew? A close look at their return objectives By D’Hondt, Catherine; De Winne, Rudy; Merli, Maxime

  1. By: Kaiser, Tim (University of Koblenz-Landau & DIW Berlin); Lusardi, Annamaria (George Washington University); Menkhoff, Lukas (HU & DIW Berlin); Urban, Carly (Montana State University)
    Abstract: We study the rapidly growing literature on the causal effects of financial education programs in a meta-analysis of 76 randomized experiments with a total sample size of over 160,000 individuals. The evidence shows that financial education programs have, on average, positive causal treatment effects on financial knowledge and downstream financial behaviors. Treatment effects are economically meaningful in size, similar to those realized by educational interventions in other domains and are at least three times as large as the average effect documented in earlier work. These results are robust to the method used, restricting the sample to papers published in top economics journals, including only studies with adequate power, and accounting for publication selection bias in the literature. We conclude with a discussion of the cost-effectiveness of financial education interventions.
    Keywords: financial education; financial literacy; financial behavior; RCT; meta-analysis;
    JEL: D14 G53 I21
    Date: 2020–04–29
  2. By: Oh, Eun Young (University of Portsmouth); Rosenkranz, Peter (Asian Development Bank)
    Abstract: To explore the determinants of peer-to-peer (P2P) lending expansion, this study examines factors that impact P2P lending using a sample of 62 economies over the period 2015–2017. We investigate the effects of financial development and financial literacy on the expansion of P2P lending. The level of development of financial institutions is assessed by access, efficiency, and depth. We find that financial institutions’ efficiency, financial literacy, and lower branch and ATM penetration are positively related with the expansion of P2P lending. This finding suggests that P2P lending can fill funding gaps in economies where traditional financial institutions may be less available, and thus promote financial inclusion. We also find that better information technology infrastructure and high new business density are positively associated with the expansion of P2P lending, suggesting that physical infrastructure is an essential prerequisite for it, while this is more likely to happen in dynamic business environments.
    Keywords: financial development; financial literacy; fintech; peer-to-peer lending
    JEL: E51 G23 G53 N20 O33
    Date: 2020–03–19
  3. By: Caroline PERRIN (LaRGE Research Center, Université de Strasbourg); Laurent WEILL (LaRGE Research Center, Université de Strasbourg)
    Abstract: Literature has found that women outperform men in terms of loan repayment. We can therefore question whether more gender equality in access to credit fosters financial stability. We test this hypothesis using cross-country data on financial inclusion from the World Bank’s Global Findex database and bank-level data on financial stability. We perform regressions at the bank level to check if the female-to-male ratio of access to credit affects financial stability. We find evidence that the gender gap in access to credit exerts a detrimental influence on financial stability. This finding is confirmed in robustness checks that control for alternative measures of financial stability and endogeneity. Therefore our findings support the view that enhancing access to credit for women relative to men is beneficial for financial stability.
    Keywords: financial inclusion, access to credit, financial stability, gender equality.
    JEL: G21 J16
    Date: 2021
  4. By: Catia Batista (Nova School of Business and Economics, CReAM, IZA and NOVAFRICA); Pedro C. Vicente (Nova School of Business and Economics, BREAD, and NOVAFRICA)
    Abstract: Rural areas in sub-Saharan Africa are typically underserved by financial services. We measure the economic impact of introducing mobile money for the first time in rural villages of Mozambique using a randomized control trial. This intervention led to consumption smoothing through increased transfers as a response to both geo-referenced village-level floods and household-level idiosyncratic shocks. Importantly, we find that the availability of mobile money increased migration out of rural areas, where we observe lower agricultural activity and investment. Our work illustrates how financial inclusion can accelerate African urbanization and structural change while improving welfare in rural areas.
    Keywords: mobile money, migration, remittances, technology adoption, insurance, consumption smoothing, investment, savings, Mozambique, Africa.
    JEL: O12 O15 O16 O33 G20 R23
    Date: 2021–04
  5. By: Kaiser, Tim (University of Koblenz-Landau & DIW Berlin); Menkhoff, Lukas (DIW Berlin)
    Abstract: We study the literature on school financial education programs for children and youth via a quantitative meta-analysis of 37 (quasi-) experiments. We find that financial education treatments have, on average, sizeable impacts on financial knowledge (+0.33 SD), similar to educational interventions in other domains. Additionally, we document smaller effects on financial behaviors among students (+0.07 SD). When restricting the sample to 18 randomized experiments average effect sizes are estimated to be about 0.15 SD units on financial knowledge and 0.07 SD units on financial behaviors. These results are robust irrespective of the meta-analytic method used and when accounting for publication bias. Subgroup analyses show the beneficial effect of more intensive treatments, albeit with decreasing marginal returns.
    Keywords: financial education; financial literacy; financial behavior; meta-analysis ;
    JEL: I21 A21 D14
    Date: 2019–09–30
  6. By: Grohmann, Antonia (DIW Berlin); Schoofs, Annekathrin (University of Passau & RWI)
    Abstract: Research has consistently shown that women’s involvement in household decision making positively affects household outcomes such as nutrition and education of children. Is financial literacy a determinant for women to participate in intra-household decision making? Using data on savings groups in Rwanda, we examine this relationship and show that women with higher financial literacy are more involved in financial and expenditure decisions. Instrumental Variable estimations confirm a causal link. For this reason, we perform a decomposition analysis breaking down the gender gap in financial literacy into differences based on observed sociodemographic and psychological characteristics and differences in returns on these characteristics. Our results show high explanatory power by education, happiness, symptoms of depression, and openness, but also suggest that a substantial fraction can be explained by differences in returns. We argue that this results from a strong role of society and culture.
    Keywords: financial literacy; women empowerment; intra-household decision making;
    JEL: D14 J16 G02
    Date: 2019–09–19
  7. By: Katie Eddins; Elizabeth Clary
    Abstract: This brief offers guidance to grantees who want to or already address one of the adulthood preparation subjects (APSs)—financial literacy—in their Personal Responsibility Education Program (PREP) program.
    Keywords: PREP, PMAPS, APS, Adulthood, Financial Literacy, Financial Capability
  8. By: Luedtke, Allison Oldham (St. Olaf College); Urban, Carly (Montana State University)
    Abstract: Financial Education courses required for high school graduation make a difference in students' future financial lives. Given that schools exercise local control, there are a variety of types of courses offered and required by US high schools. It remains unclear why and where this variation exists. Using a novel data set of unique high school personal finance course offerings and requirements paired with distances between high schools in the US, we approximate a network of nearby peer high schools. We use this network of peer schools to measure the potential influence of nearby schools on an individual high school's decision to offer financial education courses. We find that high schools are more likely to require or offer financial education courses similar to those of their peer schools. Having an additional peer that incorporates financial education into their curriculum makes it more likely a high school will change their curriculum to do the same. This is true across types of courses: required standalone courses, required courses that incorporate but do not solely focus on personal finance, and standalone electives. The results indicate that schools' nearby peers are related to what types of services to offer their students, and these networks are more predictive than economic or demographic characteristics of the school in determining personal finance course requirements. Local networks can potentially provide momentum in expanding access to financial education.
    Keywords: financial education, financial literacy, networks
    JEL: G53 I20 L14
    Date: 2021–04
  9. By: D’Hondt, Catherine (Université catholique de Louvain, LIDAM/LFIN, Belgium); De Winne, Rudy (Université catholique de Louvain, LIDAM/LFIN, Belgium); Merli, Maxime
    Abstract: Using information self-reported by retail investors in a risk-return profiling survey, we investigate the determinants of individual return objectives as well as the capacity of investors to reach them. Controlling for a large set of covariates, we provide empirical evidence that return objectives are related to subjective individual characteristics (such as financial literacy and risk tolerance), some sociodemographics (age, education), as well as recent past trading intensity. Retail investors with higher return objectives perform better, compared to their counterparts who want to avoid any risk of capital loss. The capacity to reach the return objective however decreases as the level of return objectives increases.
    Keywords: Return objectives, Risk tolerance, Financial literacy, Retail investors, MiFID
    JEL: G11 G40
    Date: 2021–03–08

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