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Economic literacy, inequality, and financial development

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  • Lo Prete, Anna

Abstract

Empirical studies of the link between finance and inequality document that across countries financial development is associated with lower and decreasing income inequality. This article uses an indicator of economic literacy as a proxy for the ability to reap the benefits of financial investment opportunities, and documents that such specific competences matter for the relationship between changes in inequality and financial development. As financial markets become more sophisticated, the ability to take advantage of new investment opportunities may help reduce inequality, and the empirical association between financial development and lower income inequality indeed appears to be driven by economic literacy.

Suggested Citation

  • Lo Prete, Anna, 2013. "Economic literacy, inequality, and financial development," Economics Letters, Elsevier, vol. 118(1), pages 74-76.
    • Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:74-76
    DOI: 10.1016/j.econlet.2012.09.029
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    References listed on IDEAS

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    Cited by:

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    2. Hamideh Mohtashami Borzadaran & Mehdi Behname & Sayed Mahdi Mostafavi, 2013. "Natural Resources, Openness and Income Inequality in Iran," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 16(49), pages 3-26, September.
    3. Giovanni Gallo & Alessia sconti, 2023. "Could financial education be a universal social policy? A simulation of potential influences on inequality levels," Center for the Analysis of Public Policies (CAPP) 0182, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    4. Altunbaş, Yener & Thornton, John & Vasilakis, Chrysovalantis, 2023. "More Foreign Aid, Less Financial Development," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 76(4), pages 495-528.
    5. Giofré, Maela, 2017. "Financial education, investor protection and international portfolio diversification," Journal of International Money and Finance, Elsevier, vol. 71(C), pages 111-139.
    6. Schicks, Jessica, 2014. "Over-Indebtedness in Microfinance – An Empirical Analysis of Related Factors on the Borrower Level," World Development, Elsevier, vol. 54(C), pages 301-324.
    7. Yongfen Shi & Sudeshna Paul & Sudharshan Reddy Paramati, 2022. "The impact of financial deepening on income inequality: Empirical evidence from Australia," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3564-3579, July.
    8. Anna Lo Prete, 2018. "Inequality and the finance you know: does economic literacy matter?," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(1), pages 183-205, April.
    9. Paşa Adina Teodora, 2020. "Economic education in the digital era," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 14(1), pages 434-444, July.
    10. Susanna Levantesi & Giulia Zacchia, 2021. "Machine Learning and Financial Literacy: An Exploration of Factors Influencing Financial Knowledge in Italy," JRFM, MDPI, vol. 14(3), pages 1-21, March.
    11. Helder Ferreira de Mendonça & Diogo Martins Esteves, 2018. "Monetary authority's transparency and income inequality," Review of Development Economics, Wiley Blackwell, vol. 22(4), pages 202-227, November.
    12. Majeed, Muhammad Tariq, 2015. "Distributional Consequences of Remittances: Evidence from Sixty-Five Developing Countries," MPRA Paper 88673, University Library of Munich, Germany, revised 2016.
    13. Paramonovs Sergejs & Ijevleva Ksenija, 2015. "The Role of Marketing Tools in the Improvement of Consumers Financial Literacy," Economics and Business, Sciendo, vol. 27(1), pages 40-45, August.
    14. Jelson Serafim, 2021. "Financial deepening, Stock market, Inequality and Poverty: Some African Evidence," Working Papers REM 2021/0177, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    15. Mushtaq, Rizwan & Bruneau, Catherine, 2019. "Microfinance, financial inclusion and ICT: Implications for poverty and inequality," Technology in Society, Elsevier, vol. 59(C).
    16. Günay ÖZCAN, 2020. "Financial development and income inequality: An empirical analysis on the emerging market economies," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(624), A), pages 85-96, Autumn.
    17. Caliendo, Frank N. & Findley, T. Scott, 2013. "Time inconsistency and retirement planning," Economics Letters, Elsevier, vol. 121(1), pages 30-34.
    18. Bucher-Koenen, Tabea & Lamla, Bettina, 2014. "The long Shadow of Socialism: On East-West German Differences in Financial Literacy," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100585, Verein für Socialpolitik / German Economic Association.
    19. Koçak Emrah & Uzay Nısfet, 2019. "The effect of financial development on income inequality in Turkey: An estimate of the Greenwood-Jovanovic hypothesis," Review of Economic Perspectives, Sciendo, vol. 19(4), pages 319-344, December.
    20. Lo Prete, Anna, 2021. "Financial literacy, education, and voter turnout," Department of Economics and Statistics Cognetti de Martiis. Working Papers 202105, University of Turin.
    21. Kaidi Nasreddine & Sami Mensi, 2016. "Financial Development and Income Inequality: The Linear versus the Nonlinear Hypothesis," Economics Bulletin, AccessEcon, vol. 36(2), pages 609-626.
    22. Elvira NICA & Adina Teodora PASA & Maria KOVACOVA, 2019. "Economic Education In Human Resources Development," Proceedings of Administration and Public Management International Conference, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 15(1), pages 12-16, October.
    23. de Moraes, Claudio Oliveira & Roquete, Raphael Moses & Gawryszewski, Gustavo, 2023. "Who needs cash? Digital finance and income inequality," The Quarterly Review of Economics and Finance, Elsevier, vol. 91(C), pages 84-93.
    24. Gallo, Giovanni & Sconti, Alessia, 2023. "How much financial literacy matters? A simulation of potential influences on inequality levels," GLO Discussion Paper Series 1266, Global Labor Organization (GLO).

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    More about this item

    Keywords

    Inequality; Financial market participation; Economic competences;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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