Politicians, Trust and Financial Literacy: When Do Politicians Care?

Donato Masciandaro ()

No 23206, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: Politicians can be more or less active in pursuing financial-literacy policies. This paper explores the role of financial-literacy policy in modifying the financial-trust endowment of a given population taking the political cost-benefit analysis into account. As, in any period, each incumbent government can design and implement its own financial-literacy policy and as financial-literacy deficits are more likely in a period of financial innovation, we assume that constituencies more or less in favour of such policies are present in a given country. If this is the case, we can show that, in a democracy with political competition, the level of activism in implementing financial-literacy policies is positively associated with financial-instability risks, literacy benefits, and illiteracy costs. Moreover, preferences and constraints motivate the politician in charge. More specifically, a more longer time horizons, lower psychological attitudes towards the status quo, and a higher probability of re-election can increase financial-literacy efforts.

Keywords: financial literacy; financial trust; fintech; financial crisis; loss aversion; political competition (search for similar items in EconPapers)
JEL-codes: D72 G28 G53 H10 K00 (search for similar items in EconPapers)
Pages: 15
Date: 2023
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-fle, nep-mic, nep-pay, nep-pol and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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