Mobile money, a service that allows monetary value to be stored on a mobile phone and sent to other users via text messages, has been adopted by the vast majority of Kenyan households. We estimate ...that access to the Kenyan mobile money system M-PESA increased per capita consumption levels and lifted 194,000 households, or 2% of Kenyan households, out of poverty. The impacts, which are more pronounced for female-headed households, appear to be driven by changes in financial behavior—in particular, increased financial resilience and saving—and labor market outcomes, such as occupational choice, especially for women, who moved out of agriculture and into business. Mobile money has therefore increased the efficiency of the allocation of consumption over time while allowing a more efficient allocation of labor, resulting in a meaningful reduction of poverty in Kenya.
This study investigates whether geographic variation in religion-induced gambling norms affects aggregate market outcomes. We conjecture that gambling propensity would be stronger in regions with ...higher concentrations of Catholics relative to Protestants. Consistent with our conjecture, we show that in regions with higher Catholic–Protestant ratios, investors exhibit a stronger propensity to hold lottery-type stocks, broad-based employee stock option plans are more popular, the initial day return following an initial public offering is higher, and the magnitude of the negative lottery-stock premium is larger. Collectively, these results indicate that religion-induced gambling attitudes impact investors' portfolio choices, corporate decisions, and stock returns.
The ability of consumers to make informed financial decisions improves their ability to develop sound personal finance. This paper uses a panel data set from Russia, an economy in which household ...debt has grown at an astounding rate, to examine the importance of financial literacy and its effects on behavior. The paper studies both the financial and real consequences of financial illiteracy. Even though consumer borrowing increased very rapidly in Russia, only 41% of respondents demonstrate an understanding of interest compounding and only 46% can answer a simple question about inflation. Financial literacy is positively related to participation in financial markets and negatively related to the use of informal sources of borrowing. Moreover, individuals with higher financial literacy are significantly less likely to report experiencing a negative income shock during 2009 and have greater availability of unspent income and higher spending capacity. The relationship between financial literacy and availability of unspent income is higher in 2009, suggesting that financial literacy may better equip individuals to deal with macroeconomic shocks.
We analyze revealed and stated household preferences for socially responsible investments (SRI). Using a questionnaire specifically designed for this purpose and administered to a Dutch ...representative household panel, we investigate the actual and latent demand for SRI products. Respondents reported whether they owned SRI products, the reason behind this decision, but also answered stated choice questions on traditional investments and hypothetical SR products with an explicit return penalty and/or an in-kind compensation. Our results show that social investors are willing to pay a price to be socially responsible rather than needing a little nudge, such as a gift (a book or a voucher). Highly educated individuals have a substantial latent demand that is currently unexploited. Keeping education constant, individuals who consider themselves financially literate are less interested in SR products than others. Particularly at the intensive margin, the stated demand for SRI funds is sensitive to the return penalty.
POVERTY AND SELF-CONTROL Bernheim, B. Douglas; Ray, Debraj; Yeltekin, Şevin
Econometrica,
September 2015, Letnik:
83, Številka:
5
Journal Article
Recenzirano
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We argue that poverty can perpetuate itself by undermining the capacity for self-control. In line with a distinguished psychological literature, we consider modes of selfcontrol that involve the ...self-imposed use of contingent punishments and rewards. We study settings in which consumers with quasi-hyperbolic preferences confront an otherwise standard intertemporal allocation problem with credit constraints. Our main result demonstrates that low initial assets can limit self-control, trapping people in poverty, while individuals with high initial assets can accumulate indefinitely. Thus, even temporary policies that initiate accumulation among the poor may be effective. We examine implications concerning the effect of access to credit on saving, the demand for commitment devices, the design of financial accounts to promote accumulation, and the variation of the marginal propensity to consume across income from different sources. We also explore the nature of optimal self-control, demonstrating that it has a simple and behaviorally plausible structure that is immune to self-renegotiation.
This study isolates the causal effects of financial literacy and schooling on wealth accumulation using a new household dataset and an instrumental variables (IV) approach. Financial literacy and ...schooling attainment are both strongly positively associated with wealth outcomes in linear regression models, whereas the IV estimates reveal even more potent effects of financial literacy. They also indicate that the schooling effect only becomes positive when interacted with financial literacy. Estimated impacts are substantial enough to imply that investments in financial literacy could have large wealth payoffs.
Age-related deterioration in cognitive ability may compromise the ability of older adults to make major financial decisions. We explore whether knowledge and expertise accumulated from past decisions ...can offset cognitive decline to maintain decision quality over the life span. Using a unique dataset that combines measures of cognitive ability (fluid intelligence) and of general and domain-specific knowledge (crystallized intelligence), credit report data, and other measures of decision quality, we show that domain-specific knowledge and expertise provide an alternative route for sound financial decisions. That is, cognitive aging does not spell doom for financial decision-making in domains where the decision maker has developed expertise. These results have important implications for public policy and for the design of effective interventions and decision aids.
Significance At a time when the world’s 65-and-older population will double by 2035, policy changes have transferred many complex financial and healthcare decisions to individuals. Age-related declines in cognitive ability raise the specter that older adults facing major financial decisions may find them increasingly challenging. We explore whether knowledge and expertise accumulated from past decisions can offset age-related cognitive declines. Using a unique dataset that combines measures of cognitive ability, knowledge, and credit scores—a measure of creditworthiness that reflects sustained ability for sound financial decision-making—we find that cognitive decline does not spell doom. Instead, domain-specific knowledge and expertise provide an alternative route to sound financial decisions. These results suggest guidelines for designing effective interventions and decision aids across the life span.
To paint a fuller picture of economic voters, we combine personal income records with a representative election survey. We examine three central topics in the economic voting literature: pocketbook ...versus sociotropic voting, the effects of partisanship on economic evaluations, and voter myopia. First, we show that voters who appear in survey data to be voting based on the national economy are, in fact, voting equally on the basis of their personal financial conditions. Second, there is strong evidence of both partisan bias and economic information in economic evaluations, but personal economic data is required to separate the two. Third, although in experiments and aggregate historical data recent economic conditions appear to drive vote choice, we find no evidence of myopia when we examine actual personal economic data.
This paper uses a unique panel dataset of consumer financial transactions to study how consumers respond to an exogenous unanticipated income shock. Consumption rose significantly after the fiscal ...policy announcement: during the ten subsequent months, for each $1 received, consumers on average spent $0.80. We find a strong announcement effect—19 percent of the response occurs during the first two-month announcement period via credit cards. Subsequently, consumers switched to debit cards after disbursement before finally increasing spending on credit cards in the later months. Consumers with low liquid assets or with low credit card limit experienced stronger consumption responses.
This work documents that, across countries, the use of digital payment tools and platforms is associated to higher digital literacy, at all levels of financial literacy. More informed personal ...finance choices, instead, are associated to higher financial literacy, at all levels of digital literacy. The results from this descriptive analysis suggest that digital and financial literacy should be considered together when assessing the implication of digitalization for individual investors who can access digital financial products and markets in the absence of financial literacy.
•Digital (DL) and financial literacy (FL) are positively associated across countries.•They should be considered together when assessing the implication of digitalization.•The use digital payments and tools is associated to DL, at all levels of FL.•Informed personal finance choices are associated to FL, at all levels of DL.•Increasing access to digital finance through DL, without FL, could be dangerous.
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