Financial Literacy and Risk Protection During the Covid-19 Pandemic

Giuseppe Bertola and Anna Lo Prete

Department of Economics and Statistics Cognetti de Martiis. Working Papers from University of Turin

Abstract: Financial markets cannot protect from aggregate shocks but can help smooth their idiosyncratic implications across individuals. In reality, of course, markets are incomplete and may not be accessible or be used appropriately. Thus, aggregate shocks that impact individual incomes differently can be associated with idiosyncratic welfare effects through poor diversification or random mistakes. Empirical analysis of data from Italy during the first phase of the Covid-19 pandemic documents that, across households, the relationship between income and consumption shocks indeed depended in theoretically sensible ways on financial asset ownership, financial literacy, and saving choices as well as on public transfers.

Pages: pages 31
Date: 2023-12
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