Financial literacy, uncertainty and costs of education

Alessandro Bellocchi and Giuseppe Travaglini

Economics Letters, 2024, vol. 238, issue C

Abstract: This paper studies how uncertainty and costs of financial education affect spending on financial literacy. To explore the issue a dynamic stochastic model is employed. We show that the marginal value of financial literacy increases with market volatility, but is hampered by the cost of financial education. A solution is derived for the case of reversible investment. Reversibility increases the fundamental value of financial literacy because of education-related rents.

Keywords: Financial literacy; Reversibility; Stochastic optimization (search for similar items in EconPapers)
JEL-codes: C61 D81 E22 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:238:y:2024:i:c:s0165176524001848

DOI: 10.1016/j.econlet.2024.111701

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