Derek Messacar is a Senior Research Analyst in the Social Analysis and Modelling Division at Statistics Canada. He is also an Adjunct Professor in the Department of Economics at Memorial University of Newfoundland and a Research Fellow of the Retirement and Savings Institute at HEC Montréal. His current research interests include behavioral responses to personal and
corporate income taxation, financial literacy, tax mistakes, and income inequality. He has published his work in journals including the Review of Economics and Statistics, National Tax Journal, and Journal of Pension Economics and Finance. Dr. Messacar received his B.A. from Brock University, his M.A. from the University of British Columbia, and his Ph.D. from the
University of Toronto.
Tax deductions on contributions to registered savings vehicles are a common policy tool used by governments in many industrialized countries to encourage people to save for retirement. However, these plans do not typically lock in funds, which means savers may also withdraw before retirement when their marginal tax rates are still high and forgo the tax benefit. In this
paper, we investigate the extent to which pre-retirement savings withdrawals respond to changes in the net-of-tax benefit of withdrawing and whether such behavior depends on the saver’s financial literacy. To that end, we link respondents of a nationally representative financial capability survey from Canada to over 15 years of administrative tax data. Our results show that the correlation between savings withdrawals and the effective marginal tax rate is negative for those with higher financial literacy, but much weaker and sometimes statistically insignificant for those with lower financial literacy. The findings suggest that
financial literacy is an important determinant of the extent to which tax-deductible savings plans are used efficiently for retirement purposes.
Arna Olafsson is an Assistant Professor of Finance at Copenhagen Business School, a research fellow at the Danish Finance Institute, a research affiliate at CEPR, and CEPR Household Finance Network Member. She received her Ph.D. from the Stockholm School of Economics in 2014. Her main areas of research are household finance, behavioral finance, consumer credit, and labor and finance. A unifying theme in her research is the application of detailed individual-level panel data to answer important questions regarding the financial lives of individuals and households. Her current research analyzes transaction-level bank data, containing information on, e.g., income, expenditures, bank account balances, and consumer credit. Furthermore, she has collaborated with her data providers to merge this data with experimental data.
The appropriateness of many high-cost loan regulations depends on whether demand is driven by financial conditions (“misfortunes”) or imperfect decisions (“mistakes”). Bank records from Iceland show borrowers have especially low liquidity just before getting a loan, but their spending is not especially low in the days before the loan arrives and some spend a substantial fraction of the loans on seemingly inessential items. Borrowers exhibit lower decision-making ability (DMA) in linked choice experiments: 45% of loan dollars go to the bottom 20% of the DMA distribution. Standard determinants of demand do not explain this relationship, which is also mirrored by the relationship between DMA and an unambiguous “mistake.” Both “misfortune” and “mistake” thus appear to drive demand.
Magda Bianco is Head of the Bank of Italy Consumer Protection and Financial Education Department since June 2020. She is responsible for banking conduct supervision, complaints management, the banking ombudsman, financial education programs.
She holds a PhD in Economics from the London School of Economics. At the Bank of Italy since 1989, she worked in the Research Department until 1999. She then moved to the Law and Economics Unit, which she headed since 2007. Since 2014 she had been responsible for the Consumer Protection and Anti-Money Laundering Directorate.
She has published articles on corporate governance, corporate finance, bankruptcy, economics of civil justice, regulatory matters and gender issues. She served as an economic advisor to the Italian Minister of Justice in 2012-2013 and has been economic and financial consultant to the Ministry since 2013. She is a consultant for economic and financial matters for the President of the Republic.
She is a member of the Financial Consumer Protection Network (FinCoNet), the OECD International Network for Financial Education, the Italian Committee for financial education. She is Co-Chair for the G20-Global Partnership for Financial Inclusion for the years 2021-23.
Married, with a daughter and a son, she has coordinated the Bank of Italy’s Equal Opportunity Committee for the years 2014-2020.
Financial inclusion has received increasing attention over the years as a fundamental instrument to favor growth, reduce inequalities, and address poverty. In order to support policy choices aimed at enhancing financial inclusion we contribute to the analysis of its main drivers, with a special focus on demand-side factors, enquiring, more specifically, whether financial education help in enhancing financial inclusion. A cross-country analysis shows that, controlling for GDP per capita, higher levels of participation of individuals to the economic life, financial knowledge and the existence of financial capability/education strategies, reduce the probability of a country to be in the low financial inclusion segment. Since, over the last few years digitalization is offering enormous opportunities to expand inclusion (but also presents challenges to be addressed), we offer some evidence on the relationship between financial literacy and digital skills, showing that (at least in more advanced countries) digital skills acquired early in life are positively correlated with financial literacy. Based on our findings, we suggest some directions for future research, for measurement and data collection, and on relevant policy efforts.
Joanne Hsu (pronounced “shoo”) is a principal economist in the Division of Research and Statistics at the Federal Reserve Board of Governors, where she is part of the team responsible for administering and disseminating the Survey of Consumer Finances, as well as a visiting professor at the Department of Economics, Howard University. Her research is primarily in the fields of household finance, labor economics, and survey methods, and has been published in journals including the American Economic Review, Review of Financial Studies, and Journal of Human Resources. Her work currently focuses on financial sophistication, cognitive decline, and household experiences with debt, using a combination of detailed surveys and large-scale administrative data. She completed her PhD in economics at the University of Michigan and her AB in economics and international relations at Brown University.
Alzheimer’s Disease and Related Dementias (ADRD) are medical conditions characterized by deteriorating cognitive functions that are estimated to impact nearly 12 million older Americans by 2050. ADRD impedes independence in daily activities through symptoms including difficulties with memory and attention span, impaired judgement, and changing risk preferences. Concerningly, many of these symptoms pose a threat to financial well-being. Indeed, medical research has shown that financial decision-making is one of the earliest functional capacities to be lost under ADRD. Our research examines patterns of adverse financial behavior before and after an ADRD diagnosis using a novel linkage of large-scale financial data and health data. We find that ADRD is associated with adverse financial events that emerge years prior to clinical diagnosis.
Tim Kaiser holds is an assistant professor of Economics at the University of Koblenz-Landau, Germany. He received his doctoral degree at the University of Kiel, Germany, and was a post-doctoral researcher at the German Institute for Economic Research (DIW Berlin). His current research focuses on experimental impact evaluations of financial education interventions in both developing and developed countries.
We study the rapidly growing literature on the causal effects of financial education programs in a meta-analysis of 76 randomized experiments with a total sample size of over 160,000 individuals. The evidence shows that financial education programs have, on average, positive causal treatment effects on financial knowledge and downstream financial behaviors. Treatment effects are economically meaningful in size, similar to those realized by educational interventions in other domains and are at least three times as large as the average effect documented in earlier work. These results are robust to the method used, restricting the sample to papers published in top economics journals, including only studies with adequate power, and accounting for publication selection bias in the literature. We conclude with a discussion of the cost-effectiveness of financial education interventions.
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