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Banks Information Policies, Financial Literacy and Household Wealth

  • Fort, Margherita

    ()

    (University of Bologna)

  • Manaresi, Francesco

    ()

    (Bank of Italy)

  • Trucchi, Serena

    ()

    (University of Bologna)

We investigate the causal effect of financial literacy on financial assets, exploiting banks information policies for identification. In Italy, banks who belong to the PattiChiari consortium have implemented policies aimed at increasing transparency and procedural simplification. These policies may affect individuals' financial literacy without involving any direct cost for clients in terms of time, effort or resources, as we show in the paper. We exploit confidential information on whether individuals have their main bank account in one bank in the PattiChiari consortium to instrument their financial literacy level. We show that these policies have a positive and significant effect on both knowledge of financial instruments and household financial assets. Our results suggest that banks information policies have the potential to be an effective tool to increase individuals' financial literacy and that the relationship between financial literacy and wealth is largely underestimated by standard regression models.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6989.

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Length: 43 pages
Date of creation: Nov 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6989
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  1. Elsa Fornero & Chiara Monticone & Serena Trucchi, 2011. "The effect of financial literacy on mortgage choices," CeRP Working Papers 121, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  2. Jappelli, Tullio & Pischke, Jörn-Steffen & Souleles, Nicholas, 1995. "Testing for Liquidity Constraints in Euler Equations with Complementary Data Sources," CEPR Discussion Papers 1138, C.E.P.R. Discussion Papers.
  3. Lusardi, Annamaria & Mitchell, Olivia S., 2011. "Financial literacy and retirement planning in the United States," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(04), pages 509-525, October.
  4. Maarten van Rooij & Annamaria Lusardi & Rob Alessie, 2011. "Financial Literacy, Retirement Planning, and Household Wealth," DNB Working Papers 313, Netherlands Central Bank, Research Department.
  5. Tullio Jappelli & Mario Padula, 2011. "Investment in Financial Literacy and Saving Decisions," CSEF Working Papers 272, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  6. Tabea Bucher-Koenen & Annamaria Lusardi, 2011. "Financial Literacy and Retirement Planning in Germany," CeRP Working Papers 109, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  7. Tullio Jappelli, 2009. "Economic Literacy: An International Comparison," CSEF Working Papers 238, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  8. Hamermesh, Daniel S, 1984. "Consumption during Retirement: The Missing Link in the Life Cycle," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 1-7, February.
  9. Annamaria Lusardi & Olivia S Mitchelli, 2007. "Financial Literacy and Retirement Preparedness: Evidence and Implications for Financial Education," Business Economics, Palgrave Macmillan, vol. 42(1), pages 35-44, January.
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  11. repec:fth:pennfi:69 is not listed on IDEAS
  12. Christelis, Dimitris & Jappelli, Tullio & Padula, Mario, 2006. "Cognitive Abilities and Portfolio Choice," CEPR Discussion Papers 5735, C.E.P.R. Discussion Papers.
  13. Annamaria Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," CeRP Working Papers 46, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  14. Georgarakos, Dimitris & Inderst, Roman, 2014. "Financial Advice and Stock Market Participation," CEPR Discussion Papers 9922, C.E.P.R. Discussion Papers.
  15. Richard Disney & John Gathergood, . "Financial Literacy ad Indebtedness: New Evidence for UK Consumers," Discussion Papers 11/05, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
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