Exponential Growth Bias and Financial Literacy
Johan Almenberg and
Christer Gerdes ()
No 5814, IZA Discussion Papers from Institute of Labor Economics (IZA)
The tendency to underestimate the future value of a variable growing at a constant rate, an example of exponential growth bias, has been linked to household financial decision making. We show that exponential growth bias and standard measures of financial literacy are negatively correlated in a representative sample of Swedish adults. Since financial literacy is linked to household decision making, our results indicate that examining the relationship between exponential growth bias and household finance without adequate controls for financial literacy may generate biased results.
Keywords: financial literacy; exponential growth bias; household finance (search for similar items in EconPapers)
JEL-codes: D12 D14 (search for similar items in EconPapers)
Pages: 8 pages
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Published - published in: Applied Economics Letters, 2012, 19 (17), 1693-1696
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Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp5814
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