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Financial literacy and voluntary savings for retirement in Slovakia

Author

Listed:
  • Zuzana Brokesova

    (University of Economics in Bratislava)

  • Andrej Cupak

    () (National Bank of Slovakia)

  • Gueorgui Kolev

    (Middlesex University London)

Abstract

We utilise recent Household Finance and Consumption Survey microdata to report first causal effects of financial literacy on voluntary private pension schemes participation for Slovakia. Savings for retirement in the supplementary pension schemes are positively associated with financial literacy after controlling for a set of relevant socio-economic variables. One additional correctly answered financial literacy question leads to a 6 percentage points increase in the probability of having a voluntary pension savings plan in our ordinary least squares estimates. The causal impact of financial literacy increases to 16 percentage points when we address potential endogeneity problem by novel to the literature instrumental variables. Interestingly, we find less significant effects of financial literacy on the probability of individuals having employer-supported private pension savings plans. Our findings inform policy and suggest how policymakers can promote the voluntary retirement savings behaviour of individuals in Slovakia and in other Central and Eastern European countries in times of decreasing benefits of state pensions.

Suggested Citation

  • Zuzana Brokesova & Andrej Cupak & Gueorgui Kolev, 2017. "Financial literacy and voluntary savings for retirement in Slovakia," Working and Discussion Papers WP 10/2017, Research Department, National Bank of Slovakia.
  • Handle: RePEc:svk:wpaper:1051
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    References listed on IDEAS

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    Keywords

    Financial literacy; Retirement savings; Survey data; Endogeneity; Instrumental variables; Slovakia;

    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
    • I2 - Health, Education, and Welfare - - Education

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