nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2023‒01‒09
nine papers chosen by

  1. Can a Budget Recording Tool Teach Financial Skills to Youth?: Experimental Evidence from a Financial Diaries Study By Frisancho, Verónica; Herrera, Alejandro; Prina, Silvia
  2. Fintech Entry, Firm Financial Inclusion, and Macroeconomic Dynamics in Emerging Economies By Finkelstein-Shapiro, Alan; Mandelman, Federico S.; Nuguer, Victoria
  3. Attitude Towards Financial Planning of Italian Households By Marianna Brunetti; Rocco Ciciretti; Monica Gentile; Nadia Linciano; Paola Soccorso
  4. Returns on Informal and Formal finance for Indian Informal firms: A Pseudo panel data analysis By POSTI, LOKESH; KHOLIYA, MAMTA; POSTI, AKHILESH KUMAR
  5. Are Retirement Planning Tools Substitutes or Complements to Financial Capability? By Goda, Gopi Shah; Levy, Matthew R.; Flaherty Manchester, Colleen; Sojourner, Aaron; Tasoff, Joshua; Xiao, Jiusi
  6. Explaining the Financial Exclusion of the Urban Poor through the Lens of Othering:A Case Study in Bengaluru, India By Rao, Jahnavi
  7. Who participates in the credit market during the COVID-19 pandemic? By Evangelos Charalambakis; Federica Teppa; Athanasios Tsiortas
  8. FinTech adoption and household risk-taking By Hong, Claire Yurong; Lu, Xiaomeng; Pan, Jun
  9. Paying in a blink of an eye: it hurts less, but you spend more By Marie-Claire Broekhoff; Carin van der Cruijsen

  1. By: Frisancho, Verónica; Herrera, Alejandro; Prina, Silvia
    Abstract: We study the impact of a mobile app to record daily financial transactions, coupled with enumerator monitoring visits every two weeks, on youths' investment in financial literacy and financial behavior. The treatment led to a positive and statistically significant effect on financial literacy scores and greater awareness of market prices. Youth in the treatment group experienced significant improvements in access to credit. These effects persist eight months after the intervention is over.
    Keywords: Financial diaries;Financial literacy
    JEL: C93 D90 G41 G53 O12 O16
    Date: 2021–10
  2. By: Finkelstein-Shapiro, Alan; Mandelman, Federico S.; Nuguer, Victoria
    Abstract: Financial inclusion is strikingly low in emerging economies. In only a few years, financial technologies (fintech) have led to a dramatic expansion in the number of non-traditional credit intermediaries, but the macroeconomic and credit-market implications of this rapid growth of fintech are not known. We build a model with a traditional banking system and endogenous fintech intermediary creation and find that greater fintech entry delivers positive long-term effects on aggregate output and consumption. However, greater entry bolsters aggregate firm financial inclusion only if it stems from lower barriers to accessing fintech credit by smaller, unbanked firms. Decreasing entry costs for fintech intermediaries alone has only marginal effects in the aggregate. While firms that adopt fintech credit are less sensitive to domestic financial shocks and contribute to a reduction in output volatility, greater fintech entry also leads to greater volatility in bank credit, thereby introducing a tradeoff between output volatility and credit-market volatility.
    JEL: E24 E32 E44 F41 G21
    Date: 2022–01
  3. By: Marianna Brunetti (CEIS & DEF, University of Rome "Tor Vergata"); Rocco Ciciretti (CEIS & DEF, University of Rome "Tor Vergata"); Monica Gentile (CONSOB, Divisione Mercati e Consulenza Economica); Nadia Linciano (CONSOB, Divisione Mercati e Consulenza Economica); Paola Soccorso (CONSOB, Divisione Mercati e Consulenza Economica)
    Abstract: Employing structured financial planning to manage personal finances on is associ-ated with higher levels of financial well-being and increased ability to react to shocks. Therefore, it is important to understand the factors associated with the propensity to plan and what it is that promotes financial planning. Our empirical evidence for a sample of Italian households shows a poor inclination for financial planning. CONSOB Survey data on the financial investments made by of Italian household (or FIIH) are used to estimate a probit model which shows a positive association between financial planning and financial knowledge, and the relevance of personal traits such as financial anxiety and financial self-efficacy, financial control (control over savings, spending and indebtedness) and financial conditions. The findings provide useful insights for financial decision-makers in the con-text of financial education initiatives and client-intermediary relationship aimed at pro-moting appropriate attitudes and choices towards managing money
    Keywords: financial planning, budgeting, household finance, financial control, financial self-efficacy, financial literacy, financial knowledge
    JEL: D14 G51 G53 C21 C51
    Date: 2022–12–15
    Abstract: The study investigates the differential impact of various sources of finance on informal firm performance. In the informal sector, where access to finance is limited, we investigate how productivity varies with different sources of finance. Given the data limitations, a pseudo-panel data design was used by combining the three only available, independent cross-sectional surveys conducted by the National Sample Survey Office between 1999-2000 and 2015-16. Using formal and informal credit as two different sources of finance and total factor productivity (TFP) as the primary measure of firm performance, we find a positive relationship among them across all major industries; however, the impact of formal finance was higher than informal credit. Our results stand robust against alternative performance measures. Additionally, to address endogeneity concerns, dynamic panel data analysis was adopted. Obtained findings convey essential policy implications for intensification of financial inclusion and financial literacy.
    Keywords: Informal Sector, Finance, Credit, Total Factor Productivity, Pseudo Panel, India
    JEL: D2 L21 L25 M2 O14
    Date: 2022–12–07
  5. By: Goda, Gopi Shah (Stanford University); Levy, Matthew R. (London School of Economics); Flaherty Manchester, Colleen (University of Minnesota); Sojourner, Aaron (Upjohn Institute for Employment Research); Tasoff, Joshua (Claremont Graduate University); Xiao, Jiusi (Claremont Graduate University)
    Abstract: We conduct a randomized controlled trial to understand how a web-based retirement saving calculator affects workers' retirement-savings decisions. In both conditions, the calculator projects workers' retirement income goal. In the treatment condition, it also projects retirement income based on defined-contribution savings, prominently displays the gap between projected goal and actual retirement income, and allows users to interactively explore how alternative, future contribution choices would affect the gap. The treatment increased average annual retirement contributions by $174 (2.3 percent). However, effects were larger for those with greater financial knowledge, suggesting this type of tool complements, rather than substitutes for, underlying financial capability.
    Keywords: retirement planning, retirement saving, exponential-growth bias, present bias, financial literacy, financial capability
    JEL: D14 G53 J32
    Date: 2022–11
  6. By: Rao, Jahnavi
    Abstract: Financial inclusion has historically played a large part in the Indian state’s plans for the country’s financial system. However, large sections of the Indian population still lack access to the banking system and formal credit. Existing literature on the issue tends to use a quantitative lens and focus on the rural sections of the country. Therefore, the innovation of this paper lies in the fact that it uses a qualitative approach to the problem and, using Bangalore as a case study, finds that the Othering of the urban poor is a major contributing factor to their exclusion from the formal, public credit system.
    Date: 2022–12
  7. By: Evangelos Charalambakis; Federica Teppa; Athanasios Tsiortas
    Abstract: This paper provides new evidence on what determines the probability of the consumer’s decision to apply for credit as well as the probability of the consumer credit being accepted by financial institutions during the COVID-19 pandemic. The empirical analysis is based on microdata collected between April 2020 and January 2022 as part of the ECB Consumer Expectations Survey, a new online survey panel of Euro area consumers. We find that age, financial literacy, unemployment and degree of urbanization significantly affect both the application and the acceptance of credit, albeit in the opposite direction. We also document that the probability for credit application increases whereas the probability of credit approval decreases during the COVID-19 outbreak. Finally, we find that there is heterogeneity in the type of credit, particularly between secured and unsecured loans.
    Keywords: Consumer debt; Liquidity constraints; COVID-19 pandemic; Consumer Expectations Survey
    JEL: C23 D12 D14 G51
    Date: 2022–12
  8. By: Hong, Claire Yurong; Lu, Xiaomeng; Pan, Jun
    Abstract: Using a unique FinTech data containing monthly individual-level consumption, investments, and payments, we examine how FinTech can lower investment barriers and improve risk-taking. Seizing on the rapid expansion of offline usages of Alipay in China, we measure individuals' FinTech adoption by the speed and intensity with which they adopt the new technology. Our hypothesis is that individuals with high FinTech adoption, through repeated usages of the Alipay app, would build familiarity and trust, reducing the psychological barriers against investing in risky assets. Measuring risktaking by individuals' mutual-fund investments on the FinTech platform, we find that higher FinTech adoption results in higher participation and more risk-taking. Using the distance to Hangzhou as an instrument variable to capture the exogenous variation in FinTech adoption yields results of similar economic and statistical significance. Focusing on the welfare-improving aspect of FinTech inclusion, we find that individuals with high risk tolerance, hence more risk-taking capacity, and those living in under-banked cities stand to benefit more from the advent of FinTech.
    Keywords: FinTech,Digital Payment,Financial Inclusion,Consumption,Risk Taking
    JEL: G11 G50
    Date: 2021
  9. By: Marie-Claire Broekhoff; Carin van der Cruijsen
    Abstract: Consumers have been switching from cash to electronic means of paying and have become increasingly fond of online shopping. The COVID-19 pandemic has accelerated these trends. What these trends imply for the pain of paying that consumers experience has barely been studied. As pain of paying can help prevent overspending, it is important to research this topic. We designed a detailed consumer survey to do so. Using this rich data on the Netherlands, we find that electronic payments – both online and offline – hurt less than cash payments. This holds especially for contactless payments and iDEAL payments, a frequently used online payment method in the Netherlands. Interestingly, we find this for older people in particular but not for teenagers. Furthermore, the pain of paying is positively related to the price of the product or service and slightly lower for a fun trip compared to grocery shopping. The pain of paying is relatively high for women, highly educated people, people without a partner, people who find it hard to make ends meet with their income, tightwads (i.e. frugal people), people who frequently check their payments account and people with a low level of financial literacy. On average, cash is perceived to be most helpful in preventing overspending, whereas contactless payments are the least helpful.
    Keywords: D12; D91; E42
    Date: 2022–12

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