Wealth, Financial Literacy and Behavioral Biases in Japan: the Effects of Various Types of Financial Literacy

Shizuka Sekita; Vikas Kakkar; Masao Ogaki

doi:10.1016/j.jjie.2021.101190

Author(s)

Shizuka Sekita
Vikas Kakkar
Masao Ogaki

Related Research Unit(s)

Department of Economics and Finance

Detail(s)

Original language	English
Article number	101190
Journal / Publication	Journal of the Japanese and International Economies
Volume	64
Online published	6 Jan 2022
Publication status	Published - Jun 2022

Link(s)

DOI	DOI https://doi.org/10.1016/j.jjie.2021.101190 Final Published version
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Attachment(s)	Documents 94687480.pdf Final Published version, 6.71 MB, PDF Publisher's Copyright Statement This full text is made available under CC-BY-NC-ND 4.0. https://creativecommons.org/licenses/by-nc-nd/4.0/
Link to Scopus	https://www.scopus.com/record/display.uri?eid=2-s2.0-85123987579&origin=recordpage
Permanent Link	https://scholars.cityu.edu.hk/en/publications/publication(b92bf5bc-49a6-47f8-836b-b8702ee56979).html

Abstract

This paper considers the relationship between wealth, financial literacy and several other variables using data from Japan's first large-scale survey on financial literacy. Using an instrumental variables approach to account for possible endogeneity of financial literacy, we find that financial literacy has an economically large and positive impact on wealth accumulation. We also decompose financial literacy into 5 sub-categories and find that deposits literacy, risk literacy and debt literacy have significant impacts on wealth accumulation in Japan, whereas inflation literacy and insurance literacy do not. Several variables suggested by behavioral economics, such as over-confidence, self-control, myopia and risk-aversion are also significant determinants of wealth.