Numeracy and wealth

Catalina Estrada-Mejia, Marieke de Vries and Marcel Zeelenberg

Journal of Economic Psychology, 2016, vol. 54, issue C, 53-63

Abstract: Numeracy is defined as the ability to understand and use numerical information. We examined the relationship between numeracy and wealth using a cross-sectional and a longitudinal study. For a sample of approximately 1000 Dutch adults, we found a statistically significant correlation between numeracy and wealth, even after controlling for differences in education, risk preferences, beliefs about future income, financial knowledge, need for cognition or seeking financial advice. Conditional on socio-demographic characteristics, our estimates suggest that on average a one-point increase in the numeracy score (11-point scale) of the respondent is associated with 5 percent more personal wealth. Additionally, we find that numeracy is a key determinant of the wealth accumulation trajectories that people follow over time. Over a 5-year period, while participants with low numeracy decumulate wealth, participants with high numeracy maintain a constant positive level of wealth.

Keywords: Numeracy; Cognitive ability; Wealth; Wealth accumulation (search for similar items in EconPapers)
JEL-codes: D03 D12 D14 D31 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:54:y:2016:i:c:p:53-63

DOI: 10.1016/j.joep.2016.02.011

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