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Characterizing Financial and Statistical Literacy

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  • Amalia Di Girolamo
  • Glenn W. Harrison
  • Morten I. Lau
  • J. Todd Swarthout

Abstract

We characterize the literacy of an individual in a domain by their elicited subjective belief distribution over the possible responses to a question posed in that domain. We consider literacy across several financial, economic and statistical domains. We find considerable demographic heterogeneity in the degree of literacy. We also characterize the degree of consistency within a sample about their knowledge, even when that knowledge is imperfect. We show how uncertainty aversion might be a normatively attractive behavior for individuals who have imperfect literacy. Finally, we discuss extensions of our approach to characterize financial capability, the consequences of non-literacy, social literacy, and the information content of hypothetical survey measures of literacy.

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File URL: http://excen.gsu.edu/workingpapers/GSU_EXCEN_WP_2013-04.pdf
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Bibliographic Info

Paper provided by Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University in its series Experimental Economics Center Working Paper Series with number 2013-04.

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Length: 71
Date of creation: Apr 2013
Date of revision:
Handle: RePEc:exc:wpaper:2013-04

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  1. Smith, V. Kerry & Taylor, Donald H., Jr. & Sloan, Frank A., 2000. "Longevity Expectations and Death: Can People Predict Their Own Demise?," Working Papers 00-15, Duke University, Department of Economics.
  2. Maria Perozek, 2008. "Using subjective expectations to forecast longevity: do survey respondents know something we don’t know?," Demography, Springer, vol. 45(1), pages 95-113, February.
  3. James E. Matheson & Robert L. Winkler, 1976. "Scoring Rules for Continuous Probability Distributions," Management Science, INFORMS, vol. 22(10), pages 1087-1096, June.
  4. Annamaria Lusardi & Olivia S. Mitchell, 2008. "Planning and Financial Literacy: How Do Women Fare?," American Economic Review, American Economic Association, vol. 98(2), pages 413-17, May.
  5. Holt, Charles A. & Smith, Angela M., 2009. "An update on Bayesian updating," Journal of Economic Behavior & Organization, Elsevier, vol. 69(2), pages 125-134, February.
  6. Lusardi, Annamaria & Mitchell, Olivia S., 2006. "Baby boomer retirement security: The roles of planning, financial literacy, and Housing wealth," CFS Working Paper Series 2006/20, Center for Financial Studies (CFS).
  7. Manski, Charles F., 2006. "Interpreting the predictions of prediction markets," Economics Letters, Elsevier, vol. 91(3), pages 425-429, June.
  8. Delavande, Adeline & Giné, Xavier & McKenzie, David, 2011. "Measuring subjective expectations in developing countries: A critical review and new evidence," Journal of Development Economics, Elsevier, vol. 94(2), pages 151-163, March.
  9. Shane Frederick, 2005. "Cognitive Reflection and Decision Making," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 25-42, Fall.
  10. Steffen Andersen & John Fountain & Glenn W. Harrison & E. Elisabet Rutström, 2010. "Estimating Subjective Probabilities," Experimental Economics Center Working Paper Series 2010-08, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
  11. Grether, David M., 1992. "Testing bayes rule and the representativeness heuristic: Some experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 17(1), pages 31-57, January.
  12. Olivier Armantier & Wändi Bruine de Bruin & Giorgio Topa & Wilbert van der Klaauw & Basit Zafar, 2011. "Inflation expectations and behavior: Do survey respondents act on their beliefs?," Staff Reports 509, Federal Reserve Bank of New York.
  13. Glenn W. Harrison & Jimmy Martínez-Correa & J. Todd Swarthout, 2012. "Reduction of Compound Lotteries with Objective Probabilities: Theory and Evidence," Experimental Economics Center Working Paper Series 2012-04, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
  14. Harrison, Glenn W, 1994. "Expected Utility Theory and the Experimentalists," Empirical Economics, Springer, vol. 19(2), pages 223-53.
  15. Todd Elder, 2013. "The Predictive Validity of Subjective Mortality Expectations: Evidence From the Health and Retirement Study," Demography, Springer, vol. 50(2), pages 569-589, April.
  16. Hazel Bateman & Christine Eckert & John Geweke & Jordan Louviere & Susan Thorp & Stephen Satchell, 2012. "Financial Competence and Expectations Formation: Evidence from Australia," The Economic Record, The Economic Society of Australia, vol. 88(280), pages 39-63, 03.
  17. Edi Karni, 2009. "A Mechanism for Eliciting Probabilities," Econometrica, Econometric Society, vol. 77(2), pages 603-606, 03.
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