Unpacking the Causal Chain of Financial Literacy
A growing body of literature examines the causal impact of financial literacy on individual, household, and firm level outcomes. This paper unpacks the mechanism of impact by focusing on the first link in the causal chain. Specifically, it studies...
| Main Authors: | , , , |
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| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110919154530 http://hdl.handle.net/10986/3562 |
| Summary: | A growing body of literature examines
the causal impact of financial literacy on individual,
household, and firm level outcomes. This paper unpacks the
mechanism of impact by focusing on the first link in the
causal chain. Specifically, it studies the experimental
impact of financial literacy on three distinct dimensions of
financial knowledge. The analysis finds that financial
literacy does not immediately enable individuals to discern
costs and rewards that require high numeracy skills, but it
does significantly improve basic awareness of financial
choices and attitudes toward financial decisions. Monetary
incentives do not induce better performance, suggesting
cognitive constraints rather than lack of attention are a
key barrier to improving financial knowledge. These results
illuminate the strengths and limitations of financial
literacy training, which can inform the design and
anticipated effects of such programs. |
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