“The effects of financial and economic literacy on policy preferences in Italy”

by Beatrice Magistro; CeRP WP n. 192/19

As populist and protectionist sentiments across the world continue to increase, this paper explores the role that financial and economy literacy plays in influencing individual economic policy preferences. 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 original survey data collected in Italy. Findings show that financially and economically literate individuals, regardless of their economic condition, are more likely to prefer remaining in the Eurozone, to favor free trade, EU immigration, non-EU immigration, and the Fornero pension reform. Moreover, they also have significantly lower discount rates. The findings are robust to alternative specifications of the literacy measure, but not to education, suggesting that financial and economic literacy has distinctive features that more closely capture an individual’s ability to evaluate policies.

Published: September 2019