Dissertation project: As nationalist and protectionist sentiments across the world continue to increase, this dissertation explores the role that financial and economy literacy play in shaping individual economic policy preferences. More specifically, financial and economic literacy affect the accuracy with which an individual can evaluate the short-term and long-term expected costs and benefits of a certain policy: financially literate individuals are more likely to more accurately predict the effect of a specific economic policy on their economic well-being. Conversely, financially and economically illiterate individuals are less likely to be accurate at estimating the effects of a policy on their economic well-being and, as a result, they may be more likely to rely on other factors, such as core personal values (for example culture, political ideology, identity, etc.) rather than on cost-benefit analyses to make their policy decisions. To test my hypotheses, I use a multi-method approach that includes observational data from an existing survey, the British Election Survey (BES), original data collection in Italy, and a classroom experiment.
My dissertation will consist of three papers.
The first paper is available here:
Financial literacy and preferences for economic openness in the U.K.
Recent events in Europe and the U.S. suggest that the liberal order is in crisis as nationalist, protectionist, and populist political entrepreneurs and their agendas are gaining significant ground across the Western world. This illiberal shift has impacted individual policy preferences on domestic and international economic issues. Many theories have been formulated as to which factors are more likely to explain such policy preferences. My hypothesis is that financial and economic literacy affect economic policy preferences. In this paper, I analyze data from the British Election Study and I use multinomial logit models to test my theory on three contentious issues: Brexit, immigration, and views on trade. Findings suggest that financial literacy does affect economic policy preferences. Financially literate individuals, regardless of economic self-interest, are more likely to vote remain in the Brexit referendum, and they are more likely to think that free trade with the EU and immigration are good for the British economy.
The second paper is available here:
The Effects of Financial and Economic Literacy on Policy Preferences in Italy
As populist and protectionist sentiments across the world continue to increase, this paper explores the role that financial and economy literacy play in shaping individual economic policy preferences. Through a causal diagram, the theory suggests that financial and economic literacy affects individual economic policy preferences in a direct way and in an indirect manner, through discount rates. To test my hypotheses, I analyze survey data originally collected in Italy. Findings suggest that financially and economically literate individuals have significantly lower discount rates. Moreover, financially and economically literate individuals, regardless of their economic condition, are more likely to prefer remaining in the Eurozone, and to favor immigration from the EU, immigration from outside the EU, free trade, and the Fornero pension reform.
The third paper will be available soon.
Financial and economic literacy and the conditional nature of information: A survey experiment on price controls in Italy
This paper uses a survey experiment on price controls in Italy to investigate how financial and economic literacy operates in shaping policy views, varying the type of information individuals are exposed to: a statement from a political leader on the merits of the policy, and factual information on the costs and benefits of the policy. Findings underline the conditional nature of information. Financially and economically literate and illiterate individuals rely on different types of information to update their policy views. When given factual information on the societal costs and benefits of a policy, financially and economically literate individuals are more likely to understand and quantify the net welfare effect of that policy on society, than financially and economically illiterate individuals. Furthermore, a financially and economically literate individual is significantly more likely to be responsive to that factual information, and to update her beliefs accordingly. Conversely, a financially and economically illiterate individual is more likely to be responsive to cues from party leaders, and to update his beliefs accordingly.