Financial Decisions and Financial Capabilities in the Andean Region

Abstract

This paper analyzes the importance of numerical abilities, conscientiousness, and financial literacy for individuals' financial decision making and participation in formal financial markets. Our analysis is based on the Financial Capabilities Survey, which was applied in four countries of the Andean Region: Bolivia, Colombia, Ecuador, and Peru. The empirical analysis underlines the centrality of numerical abilities, different subfacets of conscientiousness (propensity to plan, perseverance, and scrupulosity), and financial literacy in developing a propensity to save and borrow, and in participating in the formal financial sector.

Inclusive health and life insurance adoption: An empirical study in Guatemala

“…Most of the surveyed individuals show a low level of financial knowledge, given that only 24.8% of them answered this question correctly, with no significant difference between people insured and not insured. This result contrasts with studies in other Latin American economies where, on average, individuals responded with at least some knowledge to questions about inflation, probably due to having experienced continuous and drastic inflation episodes (Roa, Garrón et al, 2019). Nevertheless, the difference in means test (see Table S1 in Appendix 2 in the online supplementary materials) confirms that those who experienced inflationary episodes (55 years old and over) have a better notion of the concept of inflation than those who were younger or unborn when such episodes took place.…”

“…A couple of personality traits variables were constructed from the survey. Diligence or grit, a personality trait related to conscientiousness, constitutes a key element in explaining good financial behaviors (Roa, Garrón et al, 2019). To measure this, we used the Short Grit Scale (Grit‐S) developed by Duckworth and Quinn (2009).…”

“…Therefore, in the case of our sample, individuals with experience of past inflation episodes have acquired a grasp of this economic concept. We also construct a binary indicator of numerical abilities from a survey question related to the calculation of interest rates, as suggested by Lusardi and Mitchell (2014) and Roa, Garrón et al (2019). Again, respondents performed poorly in general, given that fewer than a fifth of the respondents answered correctly (18.2%), which is in line with studies in developing economies Notably, insured people obtained 8 points more than uninsured people, and this difference is significant at the 5% level.…”

Improving Debt Literacy by 2/3 Through Four Simple Infographics Requires Numeracy and Not Focusing on Negatives of Debt

“…Numerical literacy is defined as the ability to process basic probability and numerical concepts (Fagerlin et al, 2007 ; Peters et al, 2016 ). Numeracy has been studied many times in the financial context both as a component of financial literacy (French and McKillop, 2016 ; Bannier and Schwarz, 2018 ) and as a concept that is distinct from literacy (Banks and Oldfield, 2007 ; Cole et al, 2011 ; Roa et al, 2019 ). It is well established that numeracy has a profound impact on financial decisions.…”

Readability of Korean-Language advertising disclosures moderates knowledge effects

“…Unfortunately, earlier research on financial education and knowledge often examined aggregate-level outcomes via analyses of secondary datasets (e.g. Allgood and Walstad, 2013;Herd et al, 2012;Riitsalu and Murakas, 2019;Roa et al, 2019;Seay and Robb, 2013;Tang et al, 2015;Wagner and Walstad, 2019), but not their interaction with disclosure readability on individual-level outcomes, such as product evaluation or decision satisfaction.…”