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Exploring Differences in Financial Literacy Across Countries: The Role of Individual Characteristics and Institutions

Author

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  • Andrej Cupák

    (National Bank of Slovakia
    University of Economics in Bratislava)

  • Pirmin Fessler

    (Oesterreichische Nationalbank)

  • Maria Silgoner

    (Oesterreichische Nationalbank)

  • Elisabeth Ulbrich

    (Johannes Kepler University)

Abstract

We explore microdata from the OECD/INFE survey on financial literacy of adult individuals. We find considerable differences in financial literacy across countries and decompose them into a part explainable by varying individual characteristics and a remainder. We show that individual characteristics matter with regard to differences in average financial literacy, but do not fully explain the gaps. We decompose financial literacy across its distribution and directly relate it to different policies. We then correlate the unexplained differences to institutional macroeconomic variables. We find strong correlations between unexplained differences and life expectancy, social contributions rate, PISA math scores, and internet usage, suggesting room for harmonization of environments across countries to close the financial literacy gap.

Suggested Citation

  • Andrej Cupák & Pirmin Fessler & Maria Silgoner & Elisabeth Ulbrich, 2021. "Exploring Differences in Financial Literacy Across Countries: The Role of Individual Characteristics and Institutions," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 158(2), pages 409-438, December.
  • Handle: RePEc:spr:soinre:v:158:y:2021:i:2:d:10.1007_s11205-021-02713-8
    DOI: 10.1007/s11205-021-02713-8
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    4. Hyesun Hwang & Hyung In Park, 2023. "The relationships of financial literacy with both financial behavior and financial well‐being: Meta‐analyses based on the selective literature review," Journal of Consumer Affairs, Wiley Blackwell, vol. 57(1), pages 222-244, January.
    5. Raquel Fonseca & Simon Lord, 2020. "Canadian Gender Gap in Financial Literacy: Confidence Matters," Hacienda Pública Española / Review of Public Economics, IEF, vol. 235(4), pages 153-182, December.
    6. Muhammad Hussain & Farzan Yahya & Muhammad Waqas, 2021. "Does strong governance stimulate the effect of economic freedom and financial literacy on financial inclusion? a cross-country evidence," Future Business Journal, Springer, vol. 7(1), pages 1-10, December.
    7. Andrej Cupak & Pirmin Fessler & Maria Antoinette Silgoner & Elisabeth Ulbrich, 2018. "Financial literacy in Austria: a survey of recent research results," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1/18, pages 14-26.
    8. Davoli, Maddalena & Rodríguez-Planas, Núria, 2021. "Preferences, Financial Literacy, and Economic Development," IZA Discussion Papers 14759, Institute of Labor Economics (IZA).
    9. Sara Lamboglia & Massimiliano Stacchini, 2023. "On the drivers of financial literacy: the role of intergenerational mobility," Questioni di Economia e Finanza (Occasional Papers) 766, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    Keywords

    Financial literacy gaps; Decomposition analysis; Personal finance; Survey data;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I20 - Health, Education, and Welfare - - Education - - - General

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