Financial Literacy, Financial Education, and Smoking Behavior: Evidence From Japan

Abstract

In this study, we examine the relationship between financial literacy, financial education, and smoking behavior among the Japanese population. We hypothesize that financially literate and financially educated people, who have the ability to make more rational decisions, are less likely to smoke. Using the Preference Parameters Study of Osaka University, conducted in 2010 (N = 3,706), the probit regression results show that both financial literacy (with an emphasis on knowledge of investments) and financial education (with an emphasis on savings behavior) have a significant negative impact on smoking behavior. In addition, gender, age, education, marital status, household income and assets, risky behaviors, a myopic view of the future, risk preference, and level of happiness also significantly predict the likelihood of a person being a current smoker. This study provides empirical evidence that enhancing the rational decision-making ability of individuals through financial literacy and financial education may curtail smoking behavior.

Financial Literacy and Exercise Behavior: Evidence from Japan

“…Watanapongvanich et al [23] suggested that financial literacy can be highly correlated with household asset value and education variables like a university degree. Our results may therefore suffer from a multicollinearity problem.…”

“…These questions measure a respondent's knowledge of compound interest, inflation, and risk diversification. Studies such as [22][23][24]34,[48][49][50][51][52][53][54][55] adopted these three questions, which are as follows:…”

“…[47], respondents who can answer questions a and b correctly seem to have essential economic and mathematic knowledge, while those who can answer question c correctly tend to have the necessary knowledge to make sound investment decisions [47]. Given this argument, we follow [22][23][24] and assign one point to each correct answer and zero point to each incorrect answer. Then, we find the normal average score to create the literacy variable.…”

“…In line with prior studies on the relationship between financial literacy and risky health behavior [22][23][24], we control demographic and socioeconomic effects such as gender, age, education status, marital status, household financial status, number of household members, and employment status; behavioral effect such as myopic view of the future, level of risk preference, current level of happiness, and anxiety about health; and risky health behavior such as drinking, smoking, and gambling. Table 1 provides the description for all the variables.…”

“…Moreover, financial literacy improves peoples' understanding on the value of information, leading them to have more cognitive ability and rationality. In several related papers, Watanapongvanich et al [22][23][24] argued that rationality proxied by financial literacy tends to reduce peoples' involvement in risky health behavior such as smoking and gambling. Some studies also found an association between financial literacy and improved cognitive ability [25], while others found an association between financial illiteracy and limited cognitive ability [26][27][28].…”