nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2022‒04‒18
six papers chosen by
Viviana Di Giovinazzo
Università degli Studi di Milano-Bicocca

  1. Financial Literacy and Cash Holdings in Turkey By Mustafa Recep Bilici; Saygin Cevik
  2. Measuring Economic Competence of Youth with a Short Scale By Oberrauch, Luis; Kaiser, Tim; Seeber, Günther
  3. The role of inclusive education in governance for inclusive economic participation: gender evidence from sub-Saharan Africa By Simplice A. Asongu; Nicholas M. Odhiambo
  4. What a difference three years of economics education make: Evidence from lower-track schools in Germany By Eberle, Mira; Oberrauch, Luis
  5. Time Inconsistency and Overdraft Use: Evidence from Transaction Data and Behavioral Measurement Experiments By Andrej Gill; Florian Hett; Johannes Tischer
  6. Digitalization and Resilience: Firm-level Evidence During the COVID-19 Pandemic By Nordine Abidi; Sahra Sakha; Mehdi El Herradi

  1. By: Mustafa Recep Bilici; Saygin Cevik
    Abstract: This paper examines the effect of financial literacy level on cash holdings in Turkey. Utilizing the Methods of Payment Survey, which includes both financial literacy and cash-related data, we first investigate the fundamentals of financial literacy in Turkey. Based on the performance on financial literacy questions, we categorize respondents into three groups. Subsequently, we analyze how cash holding behavior differs among financial literacy groups. Our results reveal that financially literate respondents tend to hold less cash on hand and store more cash elsewhere. Moreover, card ownership increases through financial literacy and the change in payment behavior of financially literate respondents is more significant during Covid-19 pandemic. The results imply that promoting financial literacy may result in less cash usage at points of sale accompanied by the currency in circulation growth, due to the overwhelming effect of increased non-transactional demand following a positive change in financial literacy level.
    Keywords: Financial literacy, Money demand, Cash demand
    JEL: C50 E41 G53
    Date: 2022
  2. By: Oberrauch, Luis; Kaiser, Tim; Seeber, Günther
    Abstract: We present a 12-item scale measuring the cognitive component of economic competence and document the psychometric properties of the scale. Using a data set with more than 12,000 secondary school students in Germany, the scale shows high discriminatory power and covers a wide range of ability levels. Analyses of `Differential Item Functioning´ show no item bias across key demographic characteristics, and scores show meaningful associations with scores obtained from adjacent test instruments. Student-level correlates mirror estimates documented in earlier literature on economic and financial literacy as well as results relying on a more extensive scale with over 30 items. The presented short scale enables researchers and practitioners to efficiently measure economic competence of youth.
    Keywords: economic competence,economic literacy,IRT,measurement
    JEL: A21 I21 G53
    Date: 2022
  3. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: This study investigates the relevance of inclusive education in moderating the effect of good governance on female economic inclusion in sub-Saharan Africa. First, inclusive tertiary education modulates: (i) government effectiveness to induce a positive net effect on female labour force participation; (ii) political stability and corruption-control to induce negative net effects on female unemployment; (iii) government effectiveness for a positive net effect on female unemployment and (iv) regulation quality and the rule of law for positive net impacts on female employment. Second, inclusive secondary education moderates: (i) corruption-control for a positive net effect on female labour force participation; (ii) “voice and accountability†, government effectiveness and corruption-control for negative net impacts on female unemployment; (iii) the rule of law for a positive net effect on female unemployment; (iv) “voice and accountability†, government effectiveness and corruption-control for positive net effects on female employment. Policy implications are discussed. Inclusive education thresholds for complementary policy policies are also computed and discussed. At these thresholds, inclusive education becomes a necessary but not a sufficient condition to complement governance in order to promote female economic inclusion.
    Keywords: Africa; Gender; Inclusive development
    JEL: G20 I10 I32 O40 O55
    Date: 2021–01
  4. By: Eberle, Mira; Oberrauch, Luis
    Abstract: A large body of literature documents that school-based financial education generally improves financial knowledge, yet little is known about the effect of instruction in the broader economic domain. This paper evaluates the effect of a curriculum reform introducing mandatory economic education on economic competence and knowledge in German lower-track schools, in which students have lower socio-economic status and end up having lower incomes when entering the workforce. While we find small but positive effects on basic economic knowledge and interest in economic matters, we observe no effects on competences, i.e., factual and procedural knowledge in the economic domain. Quantile regressions reveal that the effect on students’ knowledge is widely consistent across the entire distribution. With regard to socio-demographic characteristics, we observe strong gender differences already before adulthood.
    Keywords: Economic education,economic knowledge,gender gap
    JEL: A21 I21
    Date: 2022
  5. By: Andrej Gill (Johannes Gutenberg University Mainz); Florian Hett (Johannes Gutenberg University Mainz); Johannes Tischer (Deutsche Bundesbank)
    Abstract: Households regularly fail to make optimal financial decisions. But what are the underlying reasons for this? Using two conceptually distinct measures of time inconsistency based on bank account transaction data and behavioral measurement experiments, we show that the excessive use of bank account overdrafts is linked to time inconsistency. By contrast, there is no correlation between a survey-based measure of financial literacy and overdraft usage. Our results indicate that consumer education and information may not suffice to overcome mistakes in households’ financial decision-making. Rather, behaviorally motivated interventions targeting specific biases in decision-making should also be considered as effective policy tools.
    Keywords: Household Finance, Paycheck Sensitivity, Fintech, Time Inconsistency, Time Preferences, Experiment, Behavioral Measurement
    JEL: D14 D90 G51 G53
    Date: 2022–03–31
  6. By: Nordine Abidi; Sahra Sakha; Mehdi El Herradi
    Abstract: The COVID-19 pandemic has resulted in an unprecedented shock to firms with adverse consequences for existing productive capacities. At the same time, digitalization has increasingly been touted as a key pathway for mitigating economic losses from the pandemic, and we expect firms facing digital constraints to be less resilient to supply shocks. This paper uses firm-level data to investigate whether digitally-enabled firms have been able to mitigate economic losses arising from the pandemic better than digitally-constrained firms in the Middle East and Central Asia region using a difference-in-differences approach. Controlling for demand conditions, we find that digitally-enabled firms faced a lower decline in sales by about 4 percentage points during the pandemic compared to digitally-constrained firms, suggesting that digitalization acted as a hedge during the pandemic. Against this backdrop, our results suggest that policymakers need to close the digital gap and accelerate firms’ digital transformation. This will be essential for economies to bounce back from the pandemic, and build the foundations for future resilience.
    Keywords: COVID-19, digitalization, technology adoption, economic resilience, Middle East and Central Asia; digitally-enabled firm; digitally-constrained firm; firms in the Middle East; firm-level data; digital transformation; COVID-19; Digitalization; Financial inclusion; Foreign corporations; Middle East and Central Asia; Asia and Pacific; Africa; Middle East; North Africa
    Date: 2022–02–18

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