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What Explains the Gender Gap in Financial Literacy? The Role of Household Decision-Making

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  • Raquel Fonseca
  • Kathleen Mullen

    ()

  • Gema Zamarro

    ()

  • Julie Zissimopoulos

    ()

Abstract

Research has shown that financial illiteracy is widespread among women, and that many women are unfamiliar with even the most basic economic concepts needed to make saving and investment decisions. This gender gap in financial literacy may contribute to the differential levels of retirement preparedness between women and men. However, little is known about the determinants of the gender gap in financial literacy. Using data from the RAND American Life Panel, the authors examined potential explanations for the gender gap including the role of marriage and division of financial decision-making among couples. They found that differences in the demographic characteristics of women and men did not explain much of the financial literacy gap, whereas education, income and current and past marital status reduced the observed gap by around 25%. Oaxaca decomposition revealed the great majority of the gender gap in financial literacy is not explained by differences in covariates - characteristics of men and women - but due to coefficients, or how literacy is produced. They did not find strong support for specialization in financial decision-making within couples by gender. Instead, they found that decision-making within couples was sensitive to the relative education level of spouses for both women and men.

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Bibliographic Info

Paper provided by RAND Corporation Publications Department in its series Working Papers with number 762.

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Length: 21 pages
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:ran:wpaper:762

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Cited by:
  1. Joanne W. Hsu, 2011. "Aging and strategic learning: the impact of spousal incentives on financial literacy," Finance and Economics Discussion Series 2011-53, Board of Governors of the Federal Reserve System (U.S.).
  2. Grabka, Markus M. & Marcus, Jan & Sierminska, Eva, 2013. "Wealth Distribution within Couples," IZA Discussion Papers 7637, Institute for the Study of Labor (IZA).
  3. Annamaria Lusardi & Olivia S. Mitchell, 2013. "The Economic Importance of Financial Literacy: Theory and Evidence," CeRP Working Papers 134, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  4. Angela Hung & Joanne Yoong & Elizabeth Brown, 2012. "Empowering Women Through Financial Awareness and Education," OECD Working Papers on Finance, Insurance and Private Pensions 14, OECD Publishing.
  5. Markus M. Grabka & Jan Marcus & Eva Sierminska, 2013. "Wealth Distribution within Couples and Financial Decision Making," SOEPpapers on Multidisciplinary Panel Data Research 540, DIW Berlin, The German Socio-Economic Panel (SOEP).
  6. Xu, Lisa & Zia, Bilal, 2012. "Financial literacy around the world : an overview of the evidence with practical suggestions for the way forward," Policy Research Working Paper Series 6107, The World Bank.
  7. Joanne W. Hsu, 2011. "Aging and Strategic Learning: The Impact of Spousal Incentives on Financial Literacy," NFI Working Papers 2011-WP-06, Indiana State University, Scott College of Business, Networks Financial Institute.

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