Does Product Familiarity Matter for Participation?

Michael Haliassos and Fuchs-Schündeln, Nicola
Authors registered in the RePEc Author Service: Nicola Fuchs-Schuendeln

No 10632, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Household access to financial products is often conditioned on previous use. However, banning access when learning is possible may be discriminatory or counter-productive. 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: Stockholding; Household debt; Consumer credit; Household finance; Familiarity; Regulation; Investor protection; Financial literacy (search for similar items in EconPapers)
JEL-codes: E21 G11 (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: Does product familiarity matter for participation? (2015)
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