nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2023‒08‒21
four papers chosen by

  1. Can a Mobile-App-Based Behavioral Intervention Teach Financial Skills to Youth? Experimental Evidence from a Financial Diaries Study By Frisancho, Veronica; Herrera, Alejandro; Prina, Silvia
  2. Could financial education be a universal social policy? A simulation of potential influences on inequality levels By Giovanni Gallo; Alessia sconti
  3. Financial inclusion, growth and poverty: Evidence from Africa in COVID-19 era By Christian-Lambert Lambert Nguena; Prince Piva Asaloko
  4. Central Bank Digital Currency Adoption: A Two-Sided Model By Brandon Tan

  1. By: Frisancho, Veronica (Inter-American Development Bank); Herrera, Alejandro (Instituto de Estudios Avanzados en Desarrollo (INESAD)); Prina, Silvia (Northeastern University)
    Abstract: We study the impact of a mobile-app-based behavioral intervention on youth's financial literacy and financial behavior. To maximize the chances to reach out-of-school youth, we provided access to a user-friendly budget recording tool coupled with biweekly enumerators' visits and SMSs during a 27-week period. The bundled treatment has positive and significant effects on financial literacy and awareness of market prices. The probability of saving and savings deposits are not affected, but usage of credit increases both at the extensive and intensive margins. Average treatment effects on financial literacy and behavior are driven by youth without previous exposure to financial education, suggesting that the bundled intervention prompted specific subgroups (i.e., youth with lower levels of financial knowledge) to invest more in financial literacy.
    Keywords: financial inclusion, financial diaries, financial literacy, youth
    JEL: C93 D90 G41 G53 O12 O16
    Date: 2023–07
  2. By: Giovanni Gallo; Alessia sconti
    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. 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 would increase the mean value of the household equivalized disposable income by 0.8% (160€ per year). Additionally, it 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 often engenders a greater reduction of inequality levels among the most vulnerable groups. Our preliminary cost analysis supports mandatory financial education in schools.
    Keywords: Financial literacy; Financial education; Household finance; Inequality; RIF regressions.
    JEL: D31 D63 G51 G53
    Date: 2023–05
  3. By: Christian-Lambert Lambert Nguena (Université de Dschang, CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Prince Piva Asaloko (Université de Yaoundé II)
    Abstract: The Covid-19 pandemic threatens to undermine committed efforts to reduce poverty in Africa. Using panel data on 39 African countries covering the period 2004-2021, our analysis shows that financial inclusion, particularly access to financial services, can be an important driver of poverty reduction in African countries. in the era of Covid-19. Moreover, we have identified the reduction of inequalities as the main channel through which financial inclusion can contribute to alleviating poverty. These results are robust and consistent using different estimation methods and poverty change index. Faced with the risks of increasing extreme poverty due to Covid-19, a policy aimed at improving financial inclusion seems necessary.
    Abstract: La pandémie de Covid-19 menace de saper les efforts engagés pour réduire la pauvreté en Afrique. En utilisant des données de panel sur 39 pays africains couvrant la période 2004-2021, notre analyse montre que l'inclusion financière, en particulier l'accès aux services financiers, peut être un facteur important de la réduction de la pauvreté dans les pays africains à l'ère de la Covid-19. De plus, nous avons identifié la réduction des inégalités comme le principal canal par lequel l'inclusion financière peut contribuer à atténuer la pauvreté. Ces résultats sont robustes et cohérents en utilisant différentes méthodes d'estimation et d'indices de changement de pauvreté. Face aux risques d'accroissement de l'extrême pauvreté du fait de la Covid-19, une politique visant une amélioration de l'inclusion financière paraît nécessaire.
    Keywords: Financial inclusion, Poverty, Inequality, COVID-19, Inclusion financière, Pauvreté, Inégalité, Covid-19
    Date: 2023
  4. By: Brandon Tan
    Abstract: For central bank digital currencies (CBDCs) to accomplish their intended objectives, it is necessary for both consumers to use them and for merchants to accept them. This paper develops a dynamic two-sided payments model with both heterogeneous households and merchants/firms to study: (1) The adoption of CBDC by households and firms, and (2) The impact of CBDC issuance on financial inclusion, informality, and disintermediation. Our model shows that there is a feedback loop where more households will adopt CBDC if more firms accept CBDC and vice versa -- incentivizing both households and firms will result in greater levels of take-up. Households are more likely to adopt CBDC if it is low cost, provides an attractive savings vehicle, reduces the cost of remittances, improves the efficiency of government payments, and (if accepted by merchants) offers a valuable means of payment. Firms are more likely to accept CBDC if fees are low, if there are tax exemptions or subsidies for transactions made in CBDC, and if households who prefer to make payments with CBDC make up a large share of revenue. Upon CBDC issuance, an economy can get stuck at a steady state with low CBDC adoption and small welfare gains if the features of CBDC which do not rely on merchant acceptance (remuneration, efficiency of cross border and government payments) are not sufficiently attractive, or if the households benefiting from these features make up a small share of merchant revenue. Temporary subsidies and using CBDC for government payments can spur initial take-up to transition an economy to a welfare improving steady state with high(er) CBDC usage. Greater adoption of CBDC will result in greater financial inclusion and formalization, but potentially the disintermediation of banks and card payments. Thus, there is a trade-off in designing CBDC for greater adoption. However, the gains are more likely to outweigh the risks in lower income economies with larger unbanked populations and informal sectors.
    Keywords: Central bank digital currency; financial inclusion; informality; digital money; disintermediation; two-sided market; adoption; payments
    Date: 2023–06–16

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