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Aging and strategic learning: the impact of spousal incentives on financial literacy

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  • Joanne W. Hsu
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    Abstract

    American women tend to be less financially literate than men, which is consistent with a household division of labor in which men manage finances. However, women also tend to outlive their husbands, so they will eventually need to take over this task. Using a new survey of older couples, I find that women acquire financial literacy as they approach widowhood. At an estimated increase of 0.04 standard deviations per year approaching widowhood, 80 percent of women in the sample would catch up with their husbands prior to the expected onset of widowhood. These findings reflect actual increases by women and are not merely an artifact of cognitive decline among older men. The results are consistent with a model in which the household division of labor breaks down when a spouse dies: women have incentives both to delay acquiring financial knowledge and also to begin learning before widowhood. This paper represents the first empirical examination of the financial literacy of both members of couples and provides a life-cycle interpretation of the gender gap in financial literacy.

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    Bibliographic Info

    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2011-53.

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    Date of creation: 2011
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    Handle: RePEc:fip:fedgfe:2011-53

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    Keywords: Financial literacy - United States ; Older people ; Finance; Personal;

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    References

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    1. Raquel Fonseca & Kathleen J. Mullen & Gema Zamarro & Julie Zissimopoulos, 2012. "What Explains the Gender Gap in Financial Literacy? The Role of Household Decision Making," Journal of Consumer Affairs, Wiley Blackwell, vol. 46(1), pages 90-106, 03.
    2. repec:att:wimass:9722 is not listed on IDEAS
    3. Joni Hersch & Leslie S. Stratton, 2002. "Housework and Wages," Journal of Human Resources, University of Wisconsin Press, vol. 37(1), pages 217-229.
    4. Azzi, Corry & Ehrenberg, Ronald G, 1975. "Household Allocation of Time and Church Attendance," Journal of Political Economy, University of Chicago Press, vol. 83(1), pages 27-56, February.
    5. Bruce Ian Carlin & David T. Robinson, 2010. "What Does Financial Literacy Training Teach Us?," NBER Working Papers 16271, National Bureau of Economic Research, Inc.
    6. Pierre-Olivier Gourinchas & Jonathan A. Parker, 1999. "Consumption Over the Life Cycle," NBER Working Papers 7271, National Bureau of Economic Research, Inc.
    7. Seema Jayachandran & Adriana Lleras-Muney, 2008. "Life Expectancy and Human Capital Investments: Evidence From Maternal Mortality Declines," NBER Working Papers 13947, National Bureau of Economic Research, Inc.
    8. Manski, Charles F. & Molinari, Francesca, 2010. "Rounding Probabilistic Expectations in Surveys," Journal of Business & Economic Statistics, American Statistical Association, vol. 28(2), pages 219-231.
    9. Adeline Delavande & Susann Rohwedder & Robert Willis, 2008. "Preparation for Retirement, Financial Literacy and Cognitive Resources," Working Papers wp190, University of Michigan, Michigan Retirement Research Center.
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    Cited by:
    1. Annamaria Lusardi & Olivia S. Mitchell, 2014. "The Economic Importance of Financial Literacy: Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 5-44, March.

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