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Wealth, Financial Literacy and Behavioral Biases: Evidence from Japan

Shizuka Sekita, Vikas Kakkar and Masao Ogaki
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Shizuka Sekita: Kyoto Sangyo University, Graduate School, Division of Economics
Vikas Kakkar: City University of Hong Kong, Department of Economics and Finance

No 2018-023, Keio-IES Discussion Paper Series from Institute for Economics Studies, Keio University

Abstract: This paper considers the relationship between wealth, financial literacy and several other variables using data from Japan's first large-scale survey on financial literacy. Using an instrumental variables approach to account for possible endogeneity of financial literacy, we find that financial literacy has an economically large and positive impact on wealth accumulation. We also decompose financial literacy into 5 sub-categories and find that deposits literacy, risk literacy and debt literacy have significant impacts on wealth accumulation in Japan, whereas inflation literacy and insurance literacy do not. In addition to financial literacy, several variables suggested by behavioral economics, such as over-confidence, self-control, myopia and loss-aversion are also significant determinants of wealth.

Keywords: Financial Literacy; Financial Education; Wealth Accumulation; Behavioral Biases; Retirement Preparation (search for similar items in EconPapers)
JEL-codes: D12 D14 J26 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2018-12-26
New Economics Papers: this item is included in nep-cfn, nep-fle and nep-upt
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Citations: View citations in EconPapers (10)

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