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on Financial Literacy and Education |
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Issue of 2018‒10‒15
four papers chosen by |
| By: | Baborska, Renata; Hernandez-Hernandez, Emilio; Magrini, Emiliano; Morales-Opazo, Cristian |
| Abstract: | The paper analyses the impact of using single, combinations and the range of three different formal financial services – savings, credit and payments – on the personal food security experience in rural areas across 88 low-and middle-income countries. It takes advantage of Global Findex database and Food Insecurity Experience Scale (FIES) – both included in the 2014-round of Gallup World Poll that collects data at individual-level and comparable worldwide. Our outcome variable of interest is the individual’s probability of experiencing food insecurity related to difficulties in access to food and which we measure through FIES. Econometrically, we employ different matching techniques: entropy balancing, matching on propensity scores and fully interacting linear matching in order to assess the consistency of estimated impacts. The results indicate mixed food security effects depending on the type of service used. Use of savings accounts significantly decreases, use of credit significantly increases and use of formal payment services has no effect on the individual’s probability of experiencing food insecurity. Our findings are consistent with the view that the specific features rather than the range of services offered by formal financial sector is determinative in the final food security experience, especially when they can be assigned to positive income effects. |
| Keywords: | Financial inclusion, experience-based food insecurity scale, rural populations, low-and middle-income countries, impact, entropy balancing |
| JEL: | O12 Q18 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:89249&r=fle |
| By: | Shah Goda, Gopi (Stanford University); Levy, Matthew (London School of Economics); Flaherty Manchester, Colleen (University of Minnesota); Sojourner, Aaron J. (University of Minnesota); Tasoff, Joshua (Claremont Graduate University) |
| Abstract: | In a nationally-representative sample, we predict retirement savings using survey-based elicitations of exponential-growth bias (EGB) and present bias (PB). We find that EGB, the tendency to neglect compounding, and PB, the tendency to value the present over the future, are highly significant and economically meaningful predictors of retirement savings. These relationships hold controlling for cognitive ability, financial literacy, and a rich set of demographic controls. We address measurement error as a potential confound and explore mechanisms through which these biases may operate. Back of the envelope calculations suggest that eliminating EGB and PB would increase retirement savings by approximately 12 percent. |
| Keywords: | household finance, retirement savings, exponential-growth bias, quasi-hyperbolic discounting, present bias, financial literacy, survey-based elicitations |
| JEL: | D91 J26 D14 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11762&r=fle |
| By: | Sandro Ambuehl; B. Douglas Bernheim; Fulya Ersoy; Donna Harris |
| Abstract: | Previous research shows that many people seek financial advice from non-experts, and that peer interactions influence financial decisions. We investigate whether such influences are beneficial, harmful, or simply haphazard. In our laboratory experiment, face-to-face communication with a randomly assigned peer significantly improves the quality of private decisions, measured by subjects' ability to choose as if they properly understand their opportunity sets. Subjects do not merely mimic those who know better, but also make better private decisions in novel tasks. People with low financial competence experience greater improvements when their partners also exhibit low financial competence. Hence, peer-to-peer communication transmits financial decision-making skills most effectively when peers are equally uninformed, rather than when an informed decision maker teaches an uninformed peer. Qualitative analysis of subjects' discussions supports this interpretation. The provision of effective financial education to one member of a pair influences the nature of communication but does not lead to additional improvements in the quality of the untreated partner's decisions, particularly in novel tasks. |
| JEL: | D03 D12 D69 G02 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25034&r=fle |
| By: | Anders Anderson; David T. Robinson |
| Abstract: | Using a financial literacy survey of Swedish pension investors matched to actual retirement savings decisions, we argue that respondents can be broken into three groups: those who are financially literate, those who mistakenly believe they are financially literate, and those who know that they are not. We examine how these groups respond differently to informational nudges encouraging them to take charge of their own investments. Investors with mistaken beliefs responded to the nudge, and were more likely to work with mass-market advisors who steer them into high-fee funds. They underperform as a result. By comparison, those who either possess financial literacy or else understand that they do not possess financial literacy were less likely to respond to the nudge. They avoided advisors, stayed with the low-cost default fund, and therefore accumulated retirement savings more quickly. |
| JEL: | G11 G18 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25061&r=fle |