The Causal Mechanism of Financial Education: Evidence from Mediation Analysis
Journal article, Peer reviewed
Published version
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https://hdl.handle.net/10642/8801Utgivelsesdato
2020-06-30Metadata
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Originalversjon
Carpena F, Zia B. The Causal Mechanism of Financial Education: Evidence from Mediation Analysis. Journal of Economic Behavior and Organization. 2020;177(September):143-184 https://dx.doi.org/10.1016/j.jebo.2020.05.001Sammendrag
This paper uses a field experiment in India and mediation analysis to investigate the causal mechanisms between financial education and financial behavior. Focusing on the mediating role of financial literacy, we propose a broader definition of financial knowledge that includes three dimensions: numeracy skills, financial awareness, and attitudes towards per sonal finance. We then employ causal mediation analysis to investigate the proportion of the treatment effect that can be attributed to these three channels. Strikingly, we find that numeracy does not mediate any effects of financial education on financial outcomes. For simple financial actions such as budgeting, both awareness and attitudes serve as pathways, while for more complex financial activities such as opening a savings account, attitudes play a more prominent role—though these patterns appear to be sensitive to confounding. We also compare our mediation analysis results to other empirical techniques that have been typically used to study mechanisms, and we discuss how mediation analysis differs from these approaches.