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Aging and Strategic Learning: The Impact of Spousal Incentives on Financial Literacy

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  • Joanne W. Hsu

Abstract

In the U.S., women tend to have lower levels of financial literacy than men. This is consistent with a household division of labor in which men manage finances. However, women also tend to outlive their husbands, so they will eventually need to take over this task. Using a new survey of older couples, I find that women acquire additional financial literacy as they approach widowhood. At an estimated increase of 0.04 standard deviations per year approaching widowhood, 80% of women in my sample would catch up with their husbands prior to the expected onset of widowhood. I also demonstrate that these findings are due to actual increases by women and are not merely an artifact of cognitive decline among older men. These results are consistent with a model in which the household division of labor breaks down when a spouse dies. The model shows that women have an incentive both to delay acquiring financial knowledge and also to begin learning before widowhood. This paper represents the first empirical examination of the financial literacy of both members of couples and provides a life-cycle interpretation of the gender gap in financial literacy.

Suggested Citation

  • Joanne W. Hsu, 2011. "Aging and Strategic Learning: The Impact of Spousal Incentives on Financial Literacy," NFI Working Papers 2011-WP-06, Indiana State University, Scott College of Business, Networks Financial Institute.
  • Handle: RePEc:nfi:nfiwps:2011-wp-06
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    File URL: http://www.indstate.edu/business/sites/business.indstate.edu/files/Docs/2011-WP-06_Hsu.pdf
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    1. repec:eee:joreco:v:25:y:2015:i:c:p:122-129 is not listed on IDEAS
    2. Annamaria Lusardi & Olivia S. Mitchell, 2014. "The Economic Importance of Financial Literacy: Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 5-44, March.
    3. Agarwalla, Sobhesh Kumar & Barua, Samir K. & Jacob, Joshy & Varma, Jayanth R., 2015. "Financial Literacy among Working Young in Urban India," World Development, Elsevier, vol. 67(C), pages 101-109.
    4. Kiliyanni, Abdul Latheef & Sivaraman, Sunitha, 2016. "The perception-reality gap in financial literacy: Evidence from the most literate state in India," International Review of Economics Education, Elsevier, vol. 23(C), pages 47-64.
    5. E. Bocchialini & B. Ronchini, 2015. "I divari di genere nella financial literacy: un'indagine empirica," Economics Department Working Papers 2015-EF01, Department of Economics, Parma University (Italy).
    6. repec:spr:jbecon:v:87:y:2017:i:5:d:10.1007_s11573-017-0853-9 is not listed on IDEAS
    7. Ute Filipiak & Yabibal M. Walle, 2015. "The Financial Literacy Gender Gap: A Question of Nature or Nurture?," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 176, Courant Research Centre PEG.
    8. Paola Bongini & Luca Colombo & Malgorzata Iwanicz-Drozdowska, 2015. "Financial Literacy: Where Do We Stand?," Journal of Financial Management, Markets and Institutions, Società editrice il Mulino, issue 1, pages 3-12, June.

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