Exponential Growth Bias and Financial Literacy

Johan Almenberg and Christer Gerdes

No 5814, IZA Discussion Papers from IZA Network @ LISER

Abstract: 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
Date: 2011-06
New Economics Papers: this item is included in nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published - published in: Applied Economics Letters, 2012, 19 (17), 1693-1696

Downloads: (external link)
https://docs.iza.org/dp5814.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp5814

Access Statistics for this paper

More papers in IZA Discussion Papers from IZA Network @ LISER Contact information at EDIRC.
Bibliographic data for series maintained by Mark Fallak ().