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Wealth, Financial Literacy and Behavioral Biases: Evidence from Japan

Author

Listed:
  • Shizuka Sekita

    (Kyoto Sangyo University, Graduate School, Division of Economics)

  • Vikas Kakkar

    (City University of Hong Kong, Department of Economics and Finance)

  • Masao Ogaki

    (Faculty of Economics, Keio University)

Abstract

This paper considers the relationship between wealth, financial literacy and several other variables using data from Japan's first large-scale survey on financial literacy. Using an instrumental variables approach to account for possible endogeneity of financial literacy, we find that financial literacy has an economically large and positive impact on wealth accumulation. We also decompose financial literacy into 5 sub-categories and find that deposits literacy, risk literacy and debt literacy have significant impacts on wealth accumulation in Japan, whereas inflation literacy and insurance literacy do not. In addition to financial literacy, several variables suggested by behavioral economics, such as over-confidence, self-control, myopia and loss-aversion are also significant determinants of wealth.

Suggested Citation

  • Shizuka Sekita & Vikas Kakkar & Masao Ogaki, 2018. "Wealth, Financial Literacy and Behavioral Biases: Evidence from Japan," Keio-IES Discussion Paper Series 2018-023, Institute for Economics Studies, Keio University.
    • Handle: RePEc:keo:dpaper:2018-023
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    References listed on IDEAS

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    1. Sekita, Shizuka, 2011. "Financial literacy and retirement planning in Japan," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(4), pages 637-656, October.
    2. 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.
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    6. Mitchell, Olivia S. & Utkus, Stephen P. (ed.), 2004. "Pension Design and Structure: New Lessons from Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780199273393.
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    11. Bucher-Koenen, Tabea & Lusardi, Annamaria, 2011. "Financial literacy and retirement planning in Germany," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(4), pages 565-584, October.
    12. 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.
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    Cited by:

    1. Kawamura, Tetsuya & Mori, Tomoharu & Motonishi, Taizo & Ogawa, Kazuhito, 2021. "Is Financial Literacy Dangerous? Financial Literacy, Behavioral Factors, and Financial Choices of Households," Journal of the Japanese and International Economies, Elsevier, vol. 60(C).
    2. Hiroko Araki & Juan Nelson Martinez Dahbura, 2021. "The Heterogeneous Relationship Between Financial Education and Investment Behavior in Japan," Keio-IES Discussion Paper Series 2021-018, Institute for Economics Studies, Keio University.
    3. Fujiki, Hiroshi, 2020. "Who adopts crypto assets in Japan? Evidence from the 2019 financial literacy survey," Journal of the Japanese and International Economies, Elsevier, vol. 58(C).
    4. Hiroshi Fujiki, 2023. "Attributes needed for Japan’s central bank digital currency," The Japanese Economic Review, Springer, vol. 74(1), pages 117-175, January.
    5. Fujiki, Hiroshi, 2020. "Cash demand and financial literacy: A case study using Japanese survey data," Japan and the World Economy, Elsevier, vol. 54(C).
    6. Fujiki, Hiroshi, 2020. "Are the actual and intended sources of financial knowledge the same? Evidence from Japan," Japan and the World Economy, Elsevier, vol. 55(C).
    7. Hiroshi Fujiki, 2019. "Who needs guidance from a financial adviser? Evidence from Japan," Working Papers on Central Bank Communication 011, University of Tokyo, Graduate School of Economics.
    8. Hiroshi Fujiki, 2020. "Empirical Analysis on Understanding of Financial Products," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 16(7), pages 1-25, October.

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    More about this item

    Keywords

    Financial Literacy; Financial Education; Wealth Accumulation; Behavioral Biases; Retirement Preparation;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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