Does product familiarity matter for participation?
Nicola Fuchs-Schündeln and
Michael Haliassos
Authors registered in the RePEc Author Service: Nicola Fuchs-Schuendeln
No 63, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE
Abstract:
Household access to financial products is often conditioned on previous use. However, banning access when learning is possible may be discriminatory or counterproductive. The 'experiment' of German reunification (exogenously) offered to East Germans unconditional access to (exogenously) unfamiliar capitalist products. Controlling for characteristics, East Germans participated immediately, were as likely to use unfamiliar risky securities as West Germans, and more likely to use consumer debt, without signs of regret. Our results suggest that mistakes of unfamiliar households can be prevented by a knowledgeable and well-incentivized financial sector and by interaction with familiar peers. This implies that regulation should refocus on the financial sector rather than on prohibiting individuals to gain familiarity with financial products.
Keywords: Household finance; familiarity; regulation; investor protection; financialliteracy; stockholding; household debt; consumer credit; social interactions; counterfactual analysis; German reunification (search for similar items in EconPapers)
JEL-codes: E21 G11 (search for similar items in EconPapers)
Date: 2015, Revised 2015
New Economics Papers: this item is included in nep-eur and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)
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Working Paper: Does Product Familiarity Matter for Participation? (2015) 
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:63
DOI: 10.2139/ssrn.2473572
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