Ask a question, get an answer. A study of the framing effect on financial literacy in Italy

Paladino, Giovanna (2022): Ask a question, get an answer. A study of the framing effect on financial literacy in Italy.

Abstract

This paper takes its cue from the relevance of the framing effect related to behavioural biases associated with economic decision-making. Most attempts to measure financial literacy rely on surveys that include standardized questions about the knowledge of three or four fundamental concepts. A survey conducted in October 2021 that involved 2500 individuals representative of the Italian population made it possible to evaluate whether questions with different wording created higher respondent engagement, determined other answers and improved performance in terms of financial literacy. The descriptive and regression analysis showed that the wording mattered in three out of four questions. More engaging wording mitigated the gender effect by reducing the probability of women choosing the ‘I do not know’ option. However, while there was evidence of an increase in the percentage of correct answers in single questions, the overall level of financial literacy showed no signs of improvement. The regression analysis found that the likelihood of being financially literate, independently of the type of question, depends on sociodemographic variables (gender, age, geographical area and level of education) and on self-evaluation of digital and economic skills. In addition, knowledge of basic maths plays a key role. Whoever knows how to compute a percentage correctly has a notably higher probability of being financially literate. This evidence has clear policy indications.

• Item Type: MPRA Paper
• Language: English
• Keywords: financial literacy, framing, gender differences
• Subjects: G - Financial Economics > G0 - General > G02 - Behavioral Finance: Underlying Principles; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; I - Health, Education, and Welfare > I2 - Education and Research Institutions > I22 - Educational Finance ; Financial Aid

References

Batsaikhan Uuriintuya. 2018. Financial literacy and inclusive growth in the European Union, Bruegel Policy Contribution Issue, n.8.

Baldiga Katherine. 2014. Gender differences in willingness to guess. Management Science, 60, 434-448.

Bianco Magda, Marconi Daniela, Romagnoli Angela e Massimiliano Stacchini. 2021. Challenges for financial inclusion: the role for financial education and new directions. Mimeo, Banca d’Italia.

Bucher‐Koenen, Tabea, Lusardi, Annamaria, Alessie, Rob e Maarten Van Rooij. 2017. How financially literate are women? An overview and new insights. Journal of Consumer Affairs, 51, 255-283.

Cassotti, Mathieu, Habib, Marianne, Poirel, Nicolas, Aı¨te, Ania e Sylvain Moutier. 2012. Positive emotional context eliminates the framing effect in decision-making. Emotion, 12, 926-931.

Costa Vania, Morena, De Sa Teixera, Nuno A., Cordeiro Santos, Ana e Eduardo Santos. When more is less in financial decision making: financial literacy magnify framing effects. Psycological Research, 85, 2036-2046.

D'Alessio, Giovanni, De Bonis, Riccardo, Neri, Andrea e Cristina Rampazzi. 2020. L'alfabetizzazione finanziaria degli italiani: i risultati dell'indagine della Banca d'Italia del 2020. Quaderni di Economia e Finanza n.588

De Bruin Wandi Bruine. 2011. Framing effects in survey design: how respondents make sense of the questions we ask in “Perspectives on Framing”, ed. Gideon Keren, Taylor & Francis, 303-324.

Driva, Anastasia, Lührmann, Melanie e Joachim Winter. 2016. Gender differences and stereotypes in financial literacy: Off to an early start. Economics Letters, 146, 143-146.

Goldin Jacob e Daniel Reck.2019. The Analysis of survey data with framing effects. The American Statistician, 73, 264-272.

Klapper, Leora F, Lusardi, Annamaria, e Georgios A. Panos. 2012. Financial literacy and the financial crisis. NBER Working Paper, n. 17930.

Lusardi, Annamaria, e Olivia S. Mitchell. 2008. Planning and financial literacy: how do women fare? American Economic Review, 98, 413–417.

Lusardi, Annamaria, e Olivia S, Mitchell. 2009. How ordinary consumers make complex economic decisions: Financial literacy and retirement readiness. National Bureau of Economic Research, Working Paper n.15350.

Lusardi, Annamaria, and Olivia S. Mitchell. 2011a. Financial literacy and retirement planning in the United States. Journal of Pension Economics and Finance, 10, 509–525.

Lusardi, Annamaria, and Olivia S. Mitchell. 2011b. Financial literacy around the world: an overview. Journal of Pension Economics and Finance, 10, 497–508.

Lusardi, Annamaria and Olivia S. Mitchell. 2014. The Economic importance of financial literacy: theory and evidence. Journal of Economic Literature, 52, 5–44.

Lusardi, Annamaria and Olivia S. Mitchell. 2021. Financial literacy and financial behavior at older ages. GFLEC Working Paper Series WP 2021-3.

Lusardi, Annamaria, Olivia S. Mitchell and Vilsa Curto. 2014. Financial literacy and financial sophistication in the older population. Journal of Pension Economics and Finance, 13, 347-366.

OECD, 2020, OECD/INFE 2020 International survey of adult financial literacy www.oecd.org/financial/education/launchoftheoecdinfeglobalfinancialliteracysurveyreport.htm

Okamoto, Shohei e Kohei Komamura. 2021. Age, gender, and financial literacy in Japan. PLoS ONE 16(11): e0259393. https://doi.org/10.1371/journal.pone.0259393

Schmeiser, Maximilian D., e Jason Seligman. 2013. Using the right yardstick: assessing financial iteracy Measures by Way of Financial Well-Being. Journal of Consumer’s Affair, 47, 243-262.

Sethi, Dinabandhu e Debashis Acharya. 2018. Financial inclusion and economic growth linkage: some cross-country evidence. Journal of Financial Economic Policy, 10, 369-385.

Tversky, Amos e Daniel Kahneman. 1981. The framing of decisions and the psychology of choice. Science. 211, 453-458.

West, Tracey, de Zwaan, Laura e Di Johnson. 2020. Boosting women: why they decline to provide responses to financial literacy questions. Available at SSRN: https://ssrn.com/abstract=3668705 or http://dx.doi.org/10.2139/ssrn.3668705

Yu Lei, Mottola Gary, Bennett David A., e Patricia A. Boyle. 2021, Adverse Impacts of Declining Financial and Health Literacy in Old Age. American Journal of Geriatric Psychiatry, 29,1129-1139.