Investment in financial literacy, social security, and portfolio choice
Abstract
We present an intertemporal portfolio choice model where individuals invest in financial literacy, save, allocate their wealth between a safe and a risky asset, and receive a pension when they retire. Financial literacy affects the excess return from and cost of stock-market participation. Investors simultaneously choose how much to save, their portfolio allocation, and the optimal investment in financial literacy. The model implies that one should observe a positive correlation between stock-market participation (and risky asset share, conditional on participation) and financial literacy, and a negative correlation between the generosity of the social security system and financial literacy. The model also implies that financial literacy accumulated early in life is positively correlated with the individual's wealth and portfolio allocations in later life. Using microeconomic cross-country data, we find support for these predictions.
Integrity signals
Registry
Cites
Statistics
Claims the paper makes
Claims other papers make about this one
Each is checked against this paper’s own text: does it say what the citing paper says it does?
Stock market participation and financial literacy are positively correlated across countries.
“Drawing on cross-country data, the authors find empirical support for the model's main prediction, i.e. that stock market participation and financial literacy are positively correlated.”
From Financial literacy, financial advice, and financial behavior (2017) · cites this paper as Jappelli and Padula (2015)
Cites
The Economic Importance of Financial Literacy: Theory and Evidence
Lusardi, A., & Mitchell, O. S. (2014) · Journal of Economic Literature · doi:10.1257/jel.52.1.5 · Cited by 4,698 · see citing works
Financial literacy and stock market participation
van Rooij, M., Lusardi, A., & Alessie, R. (2011) · Journal of Financial Economics · doi:10.1016/j.jfineco.2011.03.006 · Cited by 3,554 · cited 3× · see citing works
“Van Rooij et al. (2011) rely on a special module in the Dutch DNB Household Survey.”
BackgroundMethodInfluentialFinancial Literacy Among the Young
Lusardi, A., Mitchell, O. S., & Curto, V. (2009) · SSRN Electronic Journal · doi:10.2139/ssrn.1476982 · Cited by 1,804 · see citing works
Planning and Financial Literacy: How Do Women Fare?
Lusardi, A., & Mitchell, O. S. (2008) · American Economic Review · doi:10.1257/aer.98.2.413 · Cited by 1,512 · see citing works
Financial Literacy, Financial Education, and Economic Outcomes
Hastings, J. S., Madrian, B. C., & Skimmyhorn, W. L. (2013) · Annual Review of Economics · doi:10.1146/annurev-economics-082312-125807 · Cited by 1,041 · see citing works
How Financial Literacy Affects Household Wealth Accumulation
Behrman, J. R., Mitchell, O. S., Soo, C. K., & Bravo, D. (2012) · American Economic Review · doi:10.1257/aer.102.3.300 · Cited by 582 · cited 1× · see citing works
“Some studies address these important econometric concerns using an instrumental variables approach; see Christiansen et al. (2008), Lusardi and Mitchell (2008), Behrman et al. (2012), and van Rooij et al. (2012).”
BackgroundUnderstanding Pensions: Cognitive Function, Numerical Ability and Retirement Saving*
Banks, J., & Oldfield, Z. (2007) · Fiscal Studies · doi:10.1111/j.1475-5890.2007.00052.x · Cited by 345 · see citing works
Optimal Financial Knowledge and Wealth Inequality
Lusardi, A., Michaud, P.-C., & Mitchell, O. (2013) · doi:10.3386/w18669 · Cited by 89 · see citing works
Flagged first, then by citations
Cited by
Sorted by citations
Financial literacy, financial advice, and financial behavior
Stolper, O. A., & Walter, A. (2017) · Journal of Business Economics · doi:10.1007/s11573-017-0853-9 · Cited by 471 · see citing works
“While this review focuses on the empirics of financial literacy research, the body of literature on individuals’ financial knowledge and abilities also comprises important theoretical work (e.g. Delavande et al. 2008; Jappelli and Padula 2013, 2015; Lusardi et al. 2013).”
BackgroundResult
- Authors
- JAPPELLI, T., & PADULA, M.
- Affiliations
- Centre for Studies in Economics and Finance (IT)
- ORCID
- JAPPELLI, TULLIO
- Venue
- Journal of Pension Economics and Finance
- Publisher
- Cambridge University Press (CUP)
- Published
- 2014-12-29
- Volume
- 14
- Issue
- 4
- Pages
- 369-411
- ISSN
- 1474-7472 (ISSN-L)
- 1475-3022
- OpenAlex
- W2128712523
- Cited by
- 121
- References
- 8
- Citations by year
- 2026: 11 · 2025: 11 · 2024: 16 · 2023: 10 · 2022: 13 · 2021: 19 · 2020: 8 · 2019: 7 · 2018: 8 · 2017: 12 · 2016: 2 · 2015: 2 · 2014: 1 · 2013: 1
- FWCI
- 24.08
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Journal of Pensions Economics and Finance (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- reroDoc Digital Library (submittedVersion)
- Econstor (Econstor) (submittedVersion)
- ARCA (Università Ca' Foscari Venezia) (submittedVersion)
- Topics
- Social Sciences › Business, Management and Accounting › Accounting › Financial Literacy, Pension, Retirement Analysis
- Social Sciences › Business, Management and Accounting › Accounting › Financial Literacy and Behavior
- Social Sciences › Decision Sciences › General Decision Sciences › Decision-Making and Behavioral Economics
- Keywords
- financial literacy, social security, portfolio optimization, intertemporal portfolio choice, stock market participation, retirement, pensions, savings, risky asset allocation, wealth accumulation
About these checks
Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.
Statistics and arithmetic are recomputed, not judged.
Confidence bands are shown only for fields calibrated on our annotated test set. None is calibrated yet, so no band is shown.
What counts as a claim ›How we measure confidence ›How we check this ›
Are you an author, or do you see a problem with this page? Request a review
