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Why is voluntary financial education so unpopular ? Experimental evidence from Mexico

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  • Bruhn, Miriam
  • Lara Ibarra, Gabriel
  • McKenzie, David

Abstract

Take-up of voluntary financial education programs is typically extremely low. This paper reports on randomized experiments around a large financial literacy course offered in Mexico City to understand the reasons for low take-up, and to measure the impact of financial education. It documents that the general public displays little interest in such courses and that participation is low even among individuals who express interest in financial education. The paper experimentally investigates barriers to take-up, and finds no impact of relaxing reputational or logistical constraints and no evidence that time inconsistency is the reason for limited participation. Even relatively sizeable monetary incentives get less than 40 percent of interested individuals invited to training to attend. Using a randomized encouragement design, the authors measure the impact of the course on financial knowledge and behavior. Attending training results in a 9 percentage point increase in financial knowledge and a 9 percentage point increase in saving outcomes, but no impact on borrowing behavior. Administrative data indicate that the savings impact is relatively short-lived. The results suggest people are making optimal choices not to attend financial education courses, and point to the limits of using general purpose courses to improve financial behavior for the general population.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6439.

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Date of creation: 01 May 2013
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Handle: RePEc:wbk:wbrwps:6439

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Related research

Keywords: Financial Literacy; Access to Finance; Education For All; Access&Equity in Basic Education; Primary Education;

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References

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  1. Lusardi, Annamaria & Mitchell, Olivia S., 2010. "How ordinary consumers make complex economic decisions: Financial literacy and retirement readiness," CFS Working Paper Series 2010/11, Center for Financial Studies (CFS).
  2. L├╝hrmann, Melanie & Serra-Garcia, Marta & Winter, Joachim, 2012. "Teaching teenagers in finance: does it work?," Discussion Papers in Economics, University of Munich, Department of Economics 14101, University of Munich, Department of Economics.
  3. 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.
  4. B. Douglas Bernheim & Daniel M. Garrett & Dean M. Maki, 1997. "Education and Saving: The Long-Term Effects of High School Financial Curriculum Mandates," NBER Working Papers 6085, National Bureau of Economic Research, Inc.
  5. Mark Aguiar & Erik Hurst, 2005. "Consumption versus Expenditure," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(5), pages 919-948, October.
  6. Doi, Yoko & McKenzie, David & Zia, Bilal, 2012. "Who you train matters : identifying complementary effects of financial education on migrant households," Policy Research Working Paper Series 6157, The World Bank.
  7. Victor Stango & Jonathan Zinman, 2009. "Exponential Growth Bias and Household Finance," Journal of Finance, American Finance Association, American Finance Association, vol. 64(6), pages 2807-2849, December.
  8. John Gibson & David McKenzie & Bilal Zia, 2012. "The Impact of Financial Literacy Training for Migrants," CReAM Discussion Paper Series 1216, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  9. Cai, Jing & de Janvry, Alain & Sadoulet, Elisabeth, 2013. "Social Networks and the Decision to Insure," MPRA Paper 46861, University Library of Munich, Germany.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Why is financial education unpopular?
    by Economic Logician in Economic Logic on 2013-06-17 13:48:00
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Cited by:
  1. Bruhn, Miriam & de Souza Leao, Luciana & Legovini, Arianna & Marchetti, Rogelio & Zia, Bilal, 2013. "The impact of high school financial education : experimental evidence from Brazil," Policy Research Working Paper Series 6723, The World Bank.
  2. McKenzie, David & Siegel, Melissa, 2013. "Eliciting illegal migration rates through list randomization," MERIT Working Papers 023, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

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