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Dealing with “Do Not Know” Responses in the Assessment of Financial Literacy: The Use of a Sample Selection Model

Author

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  • Anna Conte

    (Department of Statistical Sciences, Viale Regina Elena 295G, Sapienza University of Rome, 00161 Rome, Italy)

  • Paola Paiardini

    (Department of Management, Via del Castro Laurenziano 9, Sapienza University of Rome, 00161 Rome, Italy)

  • Jacopo Temperini

    (Department of Statistical Sciences, Viale Regina Elena 295G, Sapienza University of Rome, 00161 Rome, Italy)

Abstract

Financial literacy assessments typically rely on sample surveys containing sets of questions designed to gauge respondents’ comprehension of fundamental financial concepts necessary for making informed decisions. The answers to such questions, either categorical or continuous in nature, generally include a “Do not know” option. If those who choose the “Do not know” option are not a random sample of the population but exhibit peculiar characteristics, treating these observations as either incorrect responses or as missing data may distort the results regarding the determinants of financial literacy. A noteworthy case lies in the observation from survey studies that women tend to choose the “Do not know” option more frequently than men. In similar cases, treating the “Do not know” responses as incorrect answers increases the gender gap in financial literacy while treating them as missing values reduces the gap. We propose using a model with sample selection, which enables us to disentangle the inclination to answer “Do not know” from actual responses. By applying this model to a representative sample of the UK population, we do not find any systematic gender gap in financial knowledge. The study’s novel treatment of “Do not know” responses contributes valuable insights to the broader discourse on the determinants of financial literacy and the related gender-based differences.

Suggested Citation

  • Anna Conte & Paola Paiardini & Jacopo Temperini, 2024. "Dealing with “Do Not Know” Responses in the Assessment of Financial Literacy: The Use of a Sample Selection Model," IJFS, MDPI, vol. 12(3), pages 1-29, August.
    • Handle: RePEc:gam:jijfss:v:12:y:2024:i:3:p:76-:d:1451209
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    References listed on IDEAS

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    1. Charness, Gary & Gneezy, Uri, 2012. "Strong Evidence for Gender Differences in Risk Taking," Journal of Economic Behavior & Organization, Elsevier, vol. 83(1), pages 50-58.
    2. Philomena M. Bacon & Anna Conte & Peter G. Moffatt, 2024. "Gender and gambling preference," Applied Economics, Taylor & Francis Journals, vol. 56(4), pages 426-439, January.
    3. Joanne W. Hsu & Robert Willis, 2013. "Dementia Risk and Financial Decision Making by Older Households: The Impact of Information," Journal of Human Capital, University of Chicago Press, vol. 7(4), pages 340-377.
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