nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2023‒06‒12
four papers chosen by
Viviana Di Giovinazzo
Università degli Studi di Milano-Bicocca

  1. How much financial literacy matters? A simulation of potential influences on inequality levels By Gallo, Giovanni; Sconti, Alessia
  2. Financial Literacy And Mental Accounting Analysis Of Financial Decisions And Shopping Interests In The Covid-19 Pandemic Era By Dita Rari Dwi, Dita Rari; Basuki, Teguh Iman
  3. FinTech, Investor Sophistication and Financial Portfolio Choices By Leonardo Gambacorta; Romina Gambacorta; Roxana Mihet
  4. Female unemployment, mobile money innovations and doing business by females By Simplice A. Asongu; Nicholas M. Odhiambo

  1. By: Gallo, Giovanni; Sconti, Alessia
    Abstract: This paper aims to identify the potential influence of financial literacy's marginal change on households' income (wealth) inequality levels both at the mean value and along with the distribution value. Using data from the Bank of Italy Survey of Households Income and Wealth (SHIW)'s 2016 wave - which includes the Big Three questions, a widely used measure of financial literacy - we show that replacing 10% of respondents reporting no correct answers with respondents reporting two correct answers out of three correct answers would increase the mean value of the household equivalized disposable income by 0.8% (160€ per year). Additionally, the mean value would increase by +1.5% (285€ per year) if we replace 10% of respondents reporting no correct answers with those reporting three correct answers. These results are not trivial. A lump sum leading to the same household income increase would cost on average EUR 4.1 to 7.3 billion per year in Italy. Finally, heterogeneous analysis reveals that an increase in financial literacy levels is expected to have different outcomes across the population, engendering often a greater reduction of inequality levels among the most vulnerable groups. As a natural policy implication, our results strongly support mandatory financial education in schools.
    Keywords: Financial literacy, Household finance, Wealth inequality, Income inequality, RIF regressions
    JEL: D31 D63 G53 G51
    Date: 2023
  2. By: Dita Rari Dwi, Dita Rari; Basuki, Teguh Iman
    Abstract: The Covid 19 pandemic is a situation that illustrates the uncertainty of economic conditions nationally and globally and has an impact on how individuals should react to it in financial terms. Therefore, this study aims to examine the effect of financial literacy and mental accounting on financial decisions and spending interests in the COVID-19 pandemic situation based on prospect theory and behavioural life-cycle theory. The results of research on lecturers and staff respondents at STIE Equity Bandung - Indonesia, the SEM-PLS analysis results show that financial literacy and mental accounting have an effect on financial decisions, and only mental accounting has an effect on shopping interest. In terms of prospect theory, the research findings found that in pandemic situations, individuals generally behave in risk-aversion behaviour. Meanwhile, in the viewpoint of the behavioural life-cycle theory, individuals view money as current assets with precautionary reasons.
    Keywords: Financial literacy, financial decisions, mental accounting, shopping interest, Financial literacy, financial decisions, mental accounting, shopping interest
    JEL: G0 G02
    Date: 2022–05–24
  3. By: Leonardo Gambacorta (Bank for International Settlements (BIS); Centre for Economic Policy Research (CEPR)); Romina Gambacorta (Bank of Italy); Roxana Mihet (Swiss Finance Institute - HEC Lausanne)
    Abstract: This paper analyses the links between advances in financial technology, investors’ sophistication, and the composition and returns of their financial portfolios. We develop a simple portfolio choice model under asymmetric information and derive some theoretical predictions. Using detailed microdata from Banca d’Italia, we test these predictions for Italian households over the period 2004- 20. In general, heterogeneity in portfolio composition and in returns between sophisticated and unsophisticated investors grows with improvements in financial technology. This heterogeneity is reduced only if financial technology is accessible to everyone and if investors have a similar capacity to use it.
    Keywords: Inequality, Inclusion, FinTech, Innovation, Matthew Effect.
    JEL: G1 G5 G4 D83 L8 O3
    Date: 2023–04
  4. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: The purpose of this study is to complement extant literature by examining how mobile money innovations can moderate the unfavorable incidence of female unemployment on female doing of business in 44 countries from sub-Saharan Africa for the period 2004 to 2018. The empirical evidence is based on interactive quantile regressions. The employed doing business constraints are the procedures a woman has to go through to start a business and the time for women to set up a business, while the engaged mobile money innovations are: (i) registered mobile money agents (registered mobile money agents per 1000 km2 and registered mobile money agents per 100 000 adults) and (ii) active mobile money agents (active mobile money agents per 1000 km2 and active mobile money agents per 100 000 adults). The hypothesis that mobile money innovation moderates the unfavorable incidence of female unemployment on business constraints is overwhelmingly invalid. The invalidity of the tested hypothesis is clarified, and the policy implications are discussed.
    Keywords: Mobile phones; financial inclusion; women; doing business; sub-Saharan Africa
    JEL: G20 O40 I10 I20 I32
    Date: 2023–01

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