Inequality and the finance you know: does economic literacy matter?
- 280 Downloads
In a sample of advanced and developing countries observed over the 1980–2007 period, this paper documents that the ability to use financial instruments and deal with financial market complexity that indicators of economic literacy proxy for is significantly and robustly associated to a lower variation in income inequality. The direct association between financial development and inequality usually referred to as the “finance-inequality nexus”, instead, is not significant in long-run regressions that control for the level of economic literacy nor in panel regressions.
KeywordsInequality Financial development Economic literacy
JEL ClassificationA2 I3 O1
I thank Tullio Jappelli, Maela Giofrè, Chiara Daniela Pronzato, Serena Trucchi, participants at the 7th Max Weber Fellows June Conference and at the CeRP Conference on “Financial Literacy, Saving and Retirement in Aging Society” for their helpful comments. The usual disclaimer applies.
- Baum, C. F., Schaffer, M. E., & Stillman, S. (2007). Enhanced routines for instrumental variables/GMM estimation and testing. Boston College Economics Working Paper 667.Google Scholar
- Beck, T., & Demirgüç-Kunt, A. (2009). financial institutions and markets across countries and over time: Data and analysis. World Bank Policy Research Working Paper 4943.Google Scholar
- Fornero, E., & Lo Prete, A. (2017). Voting in the aftermath of a pension reform: The role of financial literacy. CeRP Working Paper 171/17.Google Scholar
- Guiso, L., & Jappelli, T. (2008). Financial literacy and portfolio diversification. CSEF Working Paper 212.Google Scholar
- Heston, A., Summers, R., & Aten, B. (2009). Penn World Table Version 6.3. Compiled by the Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, August 2009.Google Scholar
- Honohan, P. (2009). Household financial assets in the process of development. In J. B. Davies (Ed.), Personal wealth from a global perspective, part 3 (pp. 271–292). Oxford: Oxford University Press.Google Scholar
- Paukert, F. (1973). Income distribution at different levels of development: A survey of evidence. International Labor Review, 108, 97–125.Google Scholar