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Financial Literacy and Neighborhood Effects

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  • MARIE-EVE LACHANCE

Abstract

type="main" xml:id="joca12024-abs-0001"> This study uses data from the 2009 and 2012 waves of the National Financial Capability Study to examine the effects of neighborhood characteristics on financial literacy. Controlling for individual characteristics, multivariate regression analysis shows that a zip code's education level has a significant impact on financial literacy. This finding is consistent with social learning as a mechanism of financial knowledge acquisition, with neighborhood education serving as a proxy for the level of financial knowledge of one's social network. Although social effects are not the only possible explanation for this finding, the result is robust even after controlling for a host of other factors such as getting advice from financial professionals, receiving financial education, and living in a zip code with greater employment in the financial industry. This study additionally documents that zip code education effects are present with various savings and credit measures.

Suggested Citation

  • Marie-Eve Lachance, 2014. "Financial Literacy and Neighborhood Effects," Journal of Consumer Affairs, Wiley Blackwell, vol. 48(2), pages 251-273, June.
    • Handle: RePEc:bla:jconsa:v:48:y:2014:i:2:p:251-273
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    2. Oscar A. Stolper & Andreas Walter, 2017. "Financial literacy, financial advice, and financial behavior," Journal of Business Economics, Springer, vol. 87(5), pages 581-643, July.
    3. Cristian Escudero & José L. Ruiz, 2022. "Choosing the highest annuity payout: the role of intermediation and firm reputation," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 47(4), pages 973-1004, October.
    4. Chan‐Hoong Leong & Soo Jiuan Tan & Elizabeth A. Minton & Siok Kuan Tambyah, 2021. "Economic hardship and neighborhood diversity: Influences on consumer well‐being," Journal of Consumer Affairs, Wiley Blackwell, vol. 55(4), pages 1226-1248, December.
    5. Ashenafi Fanta & Kingstone Mutsonziwa, 2021. "Financial Literacy as a Driver of Financial Inclusion in Kenya and Tanzania," JRFM, MDPI, vol. 14(11), pages 1-13, November.
    6. Fang Zhao & Jie Sun & Raj Devasagayam & Gary Clendenen, 2018. "Effects of culture and financial literacy among Chinese-Americans on participating in financial services," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 23(1), pages 62-75, March.
    7. Zhou, Yang & Yang, Manfang & Gan, Xu, 2023. "Education and financial literacy: Evidence from compulsory schooling law in China," The Quarterly Review of Economics and Finance, Elsevier, vol. 89(C), pages 335-346.
    8. Meng, Jie & Layton, Roger & Huang, Yimin, 2016. "Why do some consumers shop in this pharmacy? A cross-check of vulnerable characteristics and store types," Journal of Retailing and Consumer Services, Elsevier, vol. 30(C), pages 116-130.
    9. Ryan M. Goodstein & Alicia Lloro & Sherrie L.W. Rhine & Jeffrey M. Weinstein, 2021. "What accounts for racial and ethnic differences in credit use?," Journal of Consumer Affairs, Wiley Blackwell, vol. 55(2), pages 389-416, June.
    10. Paul Gerrans & Douglas A. Hershey, 2017. "Financial Adviser Anxiety, Financial Literacy, and Financial Advice Seeking," Journal of Consumer Affairs, Wiley Blackwell, vol. 51(1), pages 54-90, March.
    11. Ancuța Lucaci & Carmen Năstase, 2023. "Financial literacy and employment: an overview and bibliometric analysis," Journal of Financial Studies, Institute of Financial Studies, vol. 8(Special-J), pages 129-150, June.
    12. Ziyuan Lyu & Li Wei, 2021. "Information sources and participation in the Chinese insurance market: knowledge as a mediator," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(1), pages 79-106, January.
    13. Philip Young P. Hong & Maria V. Wathen & Alanna J. Shin & Intae Yoon & Jang Ho Park, 2022. "Psychological Self-Sufficiency and Financial Literacy among Low-Income Participants: An Empowerment-Based Approach to Financial Capability," Journal of Family and Economic Issues, Springer, vol. 43(4), pages 690-702, December.
    14. Sunwoo T. Lee & Kyoung Tae Kim, 2022. "A Decomposition Analysis of Racial/Ethnic Differences in Financial Knowledge and Overconfidence," Journal of Family and Economic Issues, Springer, vol. 43(4), pages 815-831, December.

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