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Culture and adult financial literacy: Evidence from the United States

Maddalena Davoli () and Núria Rodriguez-Planas ()

Economics of Education Review, 2020, vol. 78, issue C

Abstract: Using a US nationally representative sample of over 6000 adults from 26 countries of ancestry, we find a strong association between their financial literacy in the US and the financial literacy level in their self-reported country of ancestry. More specifically, if an individual from a country of ancestry with ‘average’ financial literacy had instead come from a country with financial literacy one-standard deviation above the mean, his or her likelihood of answering correctly basic financial literacy questions regarding inflation, risk diversification, and interest rate in the US would have increased by 4 percentage points, a 9% increase relative to the average financial literacy in our sample of 43%. The cultural components behind this observed association include a strong emphasis on patience, long-term orientation and risk-aversion in the country of ancestry. We also find that the association is driven by financial literacy on risk diversification and interest compounding.

Keywords: Financial literacy; Culture; Epidemiological approach; And economic decisions (search for similar items in EconPapers)
JEL-codes: D14 E2 I22 Z10 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecoedu:v:78:y:2020:i:c:s0272775719305217

DOI: 10.1016/j.econedurev.2020.102013

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