Financial literacy and attitudes to redistribution

This study proposes a conceptual framework on how financial literacy could play a key role in shaping individuals’ preference for government’s redistribution policies. Using novel data from the British Election Survey in 2014, we employ two distinct ordinal measures of attitudes to redistribution, capturing individual stated preferences on whether the government should redistribute incomes and whether the government should intervene in making incomes more equal. We find a significant negative relationship between financial literacy and attitudes in favour of government intervention for income redistribution. The effects are economically important, robust to several specifications, samples, in instrumental variable regressions and independent of generic attitudes towards other types of inequality/discrimination, e.g. towards females or homosexuals. An inquiry into the mechanisms of this significant negative relationship suggests that public value and social rivalry effects dominate homo-oeconomicus considerations in mediating the effect of financial literacy on attitudes to redistribution.