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Financial literacy and use of payday loans in the United States

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  • Kyoung Tae Kim
  • Jonghee Lee

Abstract

Using the 2012 National Financial Capability Study, this study investigated the relationship between financial literacy and payday loan use. An instrumental variable approach was employed to address a possible endogeneity issue using a newly developed instrument of financial literacy based on the community network effect. Results from linear regressions indicated that financial literacy was associated negatively with the use of payday loans, and its effect was greater with the use of the instrument.

Suggested Citation

  • Kyoung Tae Kim & Jonghee Lee, 2018. "Financial literacy and use of payday loans in the United States," Applied Economics Letters, Taylor & Francis Journals, vol. 25(11), pages 781-784, June.
    • Handle: RePEc:taf:apeclt:v:25:y:2018:i:11:p:781-784
    DOI: 10.1080/13504851.2017.1366635
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    Cited by:

    1. Marco Angrisani & Sergio Barrera & Luisa R. Blanco & Salvador Contreras, 2021. "The racial/ethnic gap in financial literacy in the population and by income," Contemporary Economic Policy, Western Economic Association International, vol. 39(3), pages 524-536, July.
    2. Esther Yin-Nei Cho, 2024. "A qualitative investigation of financial decision-making and enabling factors among ethnic minority young adults in Hong Kong," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.
    3. Julie Birkenmaier & David Rothwell & Mary Agar, 2022. "How is Consumer Financial Capability Measured?," Journal of Family and Economic Issues, Springer, vol. 43(4), pages 654-666, December.
    4. Luisa R. Blanco & O. Kenrik Duru & Carol M. Mangione, 2020. "A Community-Based Randomized Controlled Trial of an Educational Intervention to Promote Retirement Saving Among Hispanics," Journal of Family and Economic Issues, Springer, vol. 41(2), pages 300-315, June.
    5. Li, Tsung-Hsien, 2022. "Credit card and payday loan borrowing: Evidence in the SCF 2010–2019," Economics Letters, Elsevier, vol. 221(C).
    6. Kyoung Tae Kim & Jonghee Lee & Sherman D. Hanna, 2020. "The Effects of Financial Literacy Overconfidence on the Mortgage Delinquency of US Households," Journal of Consumer Affairs, Wiley Blackwell, vol. 54(2), pages 517-540, June.

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