IDEAS home Printed from https://ideas.repec.org/p/rco/dpaper/186.html
   My bibliography  Save this paper

Financial Literacy and Intra-Household Decision Making: Evidence from Rwanda

Author

Listed:
  • Grohmann, Antonia

    (DIW Berlin)

  • Schoofs, Annekathrin

    (University of Passau & RWI)

Abstract

Research has consistently shown that women’s involvement in household decision making positively affects household outcomes such as nutrition and education of children. Is financial literacy a determinant for women to participate in intra-household decision making? Using data on savings groups in Rwanda, we examine this relationship and show that women with higher financial literacy are more involved in financial and expenditure decisions. Instrumental Variable estimations confirm a causal link. For this reason, we perform a decomposition analysis breaking down the gender gap in financial literacy into differences based on observed sociodemographic and psychological characteristics and differences in returns on these characteristics. Our results show high explanatory power by education, happiness, symptoms of depression, and openness, but also suggest that a substantial fraction can be explained by differences in returns. We argue that this results from a strong role of society and culture.

Suggested Citation

  • Grohmann, Antonia & Schoofs, Annekathrin, 2019. "Financial Literacy and Intra-Household Decision Making: Evidence from Rwanda," Rationality and Competition Discussion Paper Series 186, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:186
    as

    Download full text from publisher

    File URL: https://rationality-and-competition.de/wp-content/uploads/2019/09/186.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Duncan Thomas, 1990. "Intra-Household Resource Allocation: An Inferential Approach," Journal of Human Resources, University of Wisconsin Press, vol. 25(4), pages 635-664.
    2. van Rooij, Maarten & Lusardi, Annamaria & Alessie, Rob, 2011. "Financial literacy and stock market participation," Journal of Financial Economics, Elsevier, vol. 101(2), pages 449-472, August.
    3. de Brauw, Alan & Gilligan, Daniel O. & Hoddinott, John & Roy, Shalini, 2014. "The Impact of Bolsa Família on Women’s Decision-Making Power," World Development, Elsevier, vol. 59(C), pages 487-504.
    4. Tim Kaiser & Lukas Menkhoff, 2017. "Does Financial Education Impact Financial Literacy and Financial Behavior, and If So, When?," The World Bank Economic Review, World Bank, vol. 31(3), pages 611-630.
    5. Ashraf, Nava & Karlan, Dean & Yin, Wesley, 2010. "Female Empowerment: Impact of a Commitment Savings Product in the Philippines," World Development, Elsevier, vol. 38(3), pages 333-344, March.
    6. Lusardi, Annamaria & Tufano, Peter, 2015. "Debt literacy, financial experiences, and overindebtedness," Journal of Pension Economics and Finance, Cambridge University Press, vol. 14(4), pages 332-368, October.
    7. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    8. Esther Duflo, 2003. "Grandmothers and Granddaughters: Old-Age Pensions and Intrahousehold Allocation in South Africa," The World Bank Economic Review, World Bank, vol. 17(1), pages 1-25, June.
    9. Cheryl Doss, 2013. "Intrahousehold Bargaining and Resource Allocation in Developing Countries-super-1," The World Bank Research Observer, World Bank, vol. 28(1), pages 52-78, February.
    10. Rachel Connelly & Kenneth Roberts & Zhenzhen Zheng, 2010. "The Impact of Circular Migration on the Position of Married Women in Rural China," Feminist Economics, Taylor & Francis Journals, vol. 16(1), pages 3-41.
    11. Klapper, Leora & Panos, Georgios A., 2011. "Financial literacy and retirement planning: the Russian case," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(4), pages 599-618, October.
    12. Annamaria Lusardi & Olivia S. Mitchell, 2014. "The Economic Importance of Financial Literacy: Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 5-44, March.
    13. Duncan Thomas, 1993. "The Distribution of Income and Expenditure within the Household," Annals of Economics and Statistics, GENES, issue 29, pages 109-135.
    14. Xu, Lisa & Zia, Bilal, 2012. "Financial literacy around the world : an overview of the evidence with practical suggestions for the way forward," Policy Research Working Paper Series 6107, The World Bank.
    15. Anderson, Siwan & Eswaran, Mukesh, 2009. "What determines female autonomy? Evidence from Bangladesh," Journal of Development Economics, Elsevier, vol. 90(2), pages 179-191, November.
    16. Esther Duflo, 2012. "Women Empowerment and Economic Development," Journal of Economic Literature, American Economic Association, vol. 50(4), pages 1051-1079, December.
    17. Esther Duflo & Christopher Udry, 2003. "Intrahousehold Resource Allocation in Côte D'ivoire: Social Norms, Separate Accounts and Consumption Choices," Working Papers 857, Economic Growth Center, Yale University.
    18. Doss, Cheryl R, 2001. "Is Risk Fully Pooled within the Household? Evidence from Ghana," Economic Development and Cultural Change, University of Chicago Press, vol. 50(1), pages 101-130, October.
    19. Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Baby Boomer retirement security: The roles of planning, financial literacy, and housing wealth," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 205-224, January.
    20. Doss, Cheryl, 2013. "Intrahousehold bargaining and resource allocation in developing countries," Policy Research Working Paper Series 6337, The World Bank.
    21. Mahnaz Mahdavi & Nicholas J. Horton, 2014. "Financial Knowledge among Educated Women: Room for Improvement," Journal of Consumer Affairs, Wiley Blackwell, vol. 48(2), pages 403-417, June.
    22. Tabea Bucher-Koenen & Annamaria Lusardi & Rob Alessie & Maarten van Rooij, 2017. "How Financially Literate Are Women? An Overview and New Insights," Journal of Consumer Affairs, Wiley Blackwell, vol. 51(2), pages 255-283, July.
    23. Sen, Amartya, 1999. "Commodities and Capabilities," OUP Catalogue, Oxford University Press, number 9780195650389.
    24. Annamarie Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," Working Papers wp108, University of Michigan, Michigan Retirement Research Center.
    25. Leora Klapper & Georgios A. Panos, 2011. "Financial Literacy and Retirement Planning in View of a Growing Youth Demographic: The Russian Case," CeRP Working Papers 114, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    26. Yun, Myeong-Su, 2004. "Decomposing differences in the first moment," Economics Letters, Elsevier, vol. 82(2), pages 275-280, February.
    27. Rink, Ute & Walle, Yabibal M. & Klasen, Stephan, 2021. "The financial literacy gender gap and the role of culture," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 117-134.
    28. Raquel Fonseca & Kathleen J. Mullen & Gema Zamarro & Julie Zissimopoulos, 2012. "What Explains the Gender Gap in Financial Literacy? The Role of Household Decision Making," Journal of Consumer Affairs, Wiley Blackwell, vol. 46(1), pages 90-106, March.
    29. Doi, Yoko & McKenzie, David & Zia, Bilal, 2014. "Who you train matters: Identifying combined effects of financial education on migrant households," Journal of Development Economics, Elsevier, vol. 109(C), pages 39-55.
    30. Aterido, Reyes & Beck, Thorsten & Iacovone, Leonardo, 2013. "Access to Finance in Sub-Saharan Africa: Is There a Gender Gap?," World Development, Elsevier, vol. 47(C), pages 102-120.
    31. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    32. Ruth Alsop, 2005. "Power, Rights, and Poverty : Concepts and Connections," World Bank Publications - Books, The World Bank Group, number 7349, December.
    33. Grohmann, Antonia & Hübler, Olaf & Kouwenberg, Roy & Menkhoff, Lukas, 2021. "Financial literacy: Thai middle-class women do not lag behind," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    34. Hashemi, Syed M. & Schuler, Sidney Ruth & Riley, Ann P., 1996. "Rural credit programs and women's empowerment in Bangladesh," World Development, Elsevier, vol. 24(4), pages 635-653, April.
    35. Joanne W. Hsu, 2016. "Aging and Strategic Learning: The Impact of Spousal Incentives on Financial Literacy," Journal of Human Resources, University of Wisconsin Press, vol. 51(4), pages 1036-1067.
    36. Nathan Fiala & Xi He, 2017. "Unitary or Noncooperative Intrahousehold Model? Evidence from Couples in Uganda," The World Bank Economic Review, World Bank, vol. 30(Supplemen), pages 77-85.
    37. Mabsout, Ramzi & van Staveren, Irene, 2010. "Disentangling Bargaining Power from Individual and Household Level to Institutions: Evidence on Women's Position in Ethiopia," World Development, Elsevier, vol. 38(5), pages 783-796, May.
    38. repec:adr:anecst:y:1993:i:29:p:06 is not listed on IDEAS
    39. Gathergood, John, 2012. "Self-control, financial literacy and consumer over-indebtedness," Journal of Economic Psychology, Elsevier, vol. 33(3), pages 590-602.
    40. Ronald L. Oaxaca & Michael R. Ransom, 1999. "Identification in Detailed Wage Decompositions," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 154-157, February.
    41. Naila Kabeer, 1999. "Resources, Agency, Achievements: Reflections on the Measurement of Women's Empowerment," Development and Change, International Institute of Social Studies, vol. 30(3), pages 435-464, July.
    42. McElroy, Marjorie B & Horney, Mary Jean, 1981. "Nash-Bargained Household Decisions: Toward a Generalization of the Theory of Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(2), pages 333-349, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Liu, Bofan & Lu, Bin, 2023. "Can financial literacy be a substitute for financial advisers? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Grohmann, Antonia & Hübler, Olaf & Kouwenberg, Roy & Menkhoff, Lukas, 2021. "Financial literacy: Thai middle-class women do not lag behind," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    2. Bannier, Christina E. & Schwarz, Milena, 2018. "Gender- and education-related effects of financial literacy and confidence on financial wealth," Journal of Economic Psychology, Elsevier, vol. 67(C), pages 66-86.
    3. Sholevar, Maryam & Harris, Laurence, 2019. "Mind the gap: A discussion paper on Financial Literacy, Financial behaviour and Financial Education : Is there any Gender Gap?," OSF Preprints b7zd6, Center for Open Science.
    4. Grohmann, Antonia, 2018. "Financial literacy and financial behavior: Evidence from the emerging Asian middle class," Pacific-Basin Finance Journal, Elsevier, vol. 48(C), pages 129-143.
    5. Marie-Hélène BROIHANNE, 2021. "Testing the gender gap in subjective financial literacy of spouses," Working Papers of LaRGE Research Center 2021-08, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    6. Oscar A. Stolper & Andreas Walter, 2017. "Financial literacy, financial advice, and financial behavior," Journal of Business Economics, Springer, vol. 87(5), pages 581-643, July.
    7. Tabea Bucher-Koenen & Annamaria Lusardi & Rob Alessie & Maarten van Rooij, 2017. "How Financially Literate Are Women? An Overview and New Insights," Journal of Consumer Affairs, Wiley Blackwell, vol. 51(2), pages 255-283, July.
    8. Astrid Sneyers & Anneleen Vandeplas, 2013. "Girl Power in Agricultural Production: How Much Does it Yield? A Case-Study on the Dairy Sector in India," LICOS Discussion Papers 34113, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    9. Remya Tressa Jacob & Rudra Sensarma, 2022. "Does knowledge empower? A story of debt literacy and credit usage in rural consumer finance," Working papers 529, Indian Institute of Management Kozhikode.
    10. Imai, Katsushi S. & Annim, Samuel Kobina & Kulkarni, Veena S. & Gaiha, Raghav, 2014. "Women’s Empowerment and Prevalence of Stunted and Underweight Children in Rural India," World Development, Elsevier, vol. 62(C), pages 88-105.
    11. Tabea Bucher-Koenen & Rob Alessie & Annamaria Lusardi & Maarten van Rooij, 2021. "Fearless Woman. Financial Literacy and Stock Market Participation," Working Papers 708, DNB.
    12. Davoli, Maddalena & Rodríguez-Planas, Núria, 2020. "Culture and adult financial literacy: Evidence from the United States," Economics of Education Review, Elsevier, vol. 78(C).
    13. Noviarini, Jelita & Coleman, Andrew & Roberts, Helen & Whiting, Rosalind H., 2021. "Financial literacy, debt, risk tolerance and retirement preparedness: Evidence from New Zealand," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    14. Zelu, Barbara Ama & Iranzo, Susana & Pérez Laborda, Alejandro, 2022. "Financial Inclusion and Women Economic Empowerment in Ghana," Working Papers 2072/535075, Universitat Rovira i Virgili, Department of Economics.
    15. Anderson, C. Leigh & Reynolds, Travis W. & Gugerty, Mary Kay, 2017. "Husband and Wife Perspectives on Farm Household Decision-making Authority and Evidence on Intra-household Accord in Rural Tanzania," World Development, Elsevier, vol. 90(C), pages 169-183.
    16. Yang Yang, 2023. "Hukou Identity and Economic Behaviours: A Social Identity Perspective," Erudite Ph.D Dissertations, Erudite, number ph23-02 edited by Catherine Bros & Julie Lochard, April.
    17. Kaiser, Tim & Lusardi, Annamaria, 2024. "Financial Literacy and Financial Education: An Overview," IZA Discussion Papers 16926, Institute of Labor Economics (IZA).
    18. Azra Zaimovic & Anes Torlakovic & Almira Arnaut-Berilo & Tarik Zaimovic & Lejla Dedovic & Minela Nuhic Meskovic, 2023. "Mapping Financial Literacy: A Systematic Literature Review of Determinants and Recent Trends," Sustainability, MDPI, vol. 15(12), pages 1-30, June.
    19. Grohmann, Antonia & Klühs, Theres & Menkhoff, Lukas, 2018. "Does financial literacy improve financial inclusion? Cross country evidence," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 111, pages 84-96.
    20. Bucher-Koenen, Tabea & Lamla, Bettina, 2014. "The long Shadow of Socialism: On East-West German Differences in Financial Literacy," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100585, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    financial literacy; women empowerment; intra-household decision making;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rco:dpaper:186. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Viviana Lalli (email available below). General contact details of provider: https://rationality-and-competition.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.