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Financial literacy, uncertainty and costs of education

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  • Bellocchi, Alessandro
  • Travaglini, Giuseppe

Abstract

This paper studies how uncertainty and costs of financial education affect spending on financial literacy. To explore the issue a dynamic stochastic model is employed. We show that the marginal value of financial literacy increases with market volatility, but is hampered by the cost of financial education. A solution is derived for the case of reversible investment. Reversibility increases the fundamental value of financial literacy because of education-related rents.

Suggested Citation

  • Bellocchi, Alessandro & Travaglini, Giuseppe, 2024. "Financial literacy, uncertainty and costs of education," Economics Letters, Elsevier, vol. 238(C).
    • Handle: RePEc:eee:ecolet:v:238:y:2024:i:c:s0165176524001848
    DOI: 10.1016/j.econlet.2024.111701
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial literacy; Reversibility; Stochastic optimization;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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