The Economic Importance of Financial Literacy: Theory and Evidence
2014/03/01 by Annamaria Lusardi, Olivia S. Mitchell · 4,381 citations
Business, Management and Accounting · Economics, Econometrics and Finance · #Economic growth #Economic theories and models #Economics #Finance #Financial Literacy, Pension, Retirement Analysis #Financial literacy #Functional illiteracy #Housing Market and Economics #Human capital #Political science #Population #Public economics #Sociology
paper · open access · doi:10.1257/jel.52.1.5
published in Journal of Economic Literature 52(1), 5-44 (American Economic Association)
openalex publication_date 2014/03/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/05
Abstract
This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy. We start with an overview of theoretical research which casts financial knowledge as a form of investment in human capital. Endogenizing financial knowledge has important implications for welfare as well as policies intended to enhance levels of financial knowledge in the larger population. Next, we draw on recent surveys to establish how much (or how little) people know and identify the least financially savvy population subgroups. This is followed by an examination of the impact of financial literacy on economic decision-making in the United States and elsewhere. While the literature is still young, conclusions may be drawn about the effects and consequences of financial illiteracy and what works to remedy these gaps. A final section offers thoughts on what remains to be learned if researchers are to better inform theoretical and empirical models as well as public policy.
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