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The decomposition of financial literacy: A multinomial analysis

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  • Javier Martínez Morales

    (Universidad Autónoma de Chihuahua)

Abstract

This presentation aims to calculate and discuss the decomposition of the financial literacy index as an alternative to estimate the probabilities of low and high financial literacy among household members in Mexico, based on their sociodemographic and personal finance characteristics. The construction of the index was based on the manual for measuring education and financial inclusion proposed by the OECD/INFE and 14 questions from the ENIF (National Survey of Financial Inclusion), while specific Stata commands were used to calculate the decomposition. To estimate high and low probabilities, an ordered multinomial probit probabilistic model was generated. The data were obtained from the four microdata sources of the 2021 National Survey of Financial Inclusion (ENIF), published by INEGI (National Institute of Statistics and Geography). The results confirm that the inequality in financial literacy is a consequence of a social structure problem, which contributes to new empirical evidence. Finally, exercises of this nature, using Stata, allow for the argumentation of new ways to create and evaluate more efficient variables for econometric model estimation.

Suggested Citation

  • Javier Martínez Morales, "undated". "The decomposition of financial literacy: A multinomial analysis," Mexican Stata Conference 2023 07, Stata Users Group.
    • Handle: RePEc:boc:mexi23:07
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    File URL: http://repec.org/mex2023/Mexico23_Martinez_Morales.pdf
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