What Explains the Gender Gap in Financial Literacy? The Role of Household Decision-Making

21 Pages Posted: 4 Jul 2010

See all articles by Raquel Fonseca

Raquel Fonseca

RAND Corporation

Kathleen J. Mullen

RAND Corporation

Gema Zamarro

University of Arkansas - Department of Education Reform; Center for Economic and Social Research (CESR)

Julie M. Zissimopoulos

University of Southern California - Sol Price School of Public Policy; The RAND Corporation; University of Southern California - Schaeffer Center for Health Policy and Economics

Date Written: June 1, 2010

Abstract

Research has shown that financial illiteracy is widespread among women, and that many women are unfamiliar with even the most basic economic concepts needed to make saving and investment decisions. This gender gap in financial literacy may contribute to the differential levels of retirement preparedness between women and men. However, little is known about the determinants of the gender gap in financial literacy. Using data from the RAND American Life Panel, the authors examined potential explanations for the gender gap including the role of marriage and division of financial decision-making among couples. They found that differences in the demographic characteristics of women and men did not explain much of the financial literacy gap, whereas education, income and current and past marital status reduced the observed gap by around 25%. Oaxaca decomposition revealed the great majority of the gender gap in financial literacy is not explained by differences in covariates – characteristics of men and women – but due to coefficients, or how literacy is produced. They did not find strong support for specialization in financial decision-making within couples by gender. Instead, they found that decision-making within couples was sensitive to the relative education level of spouses for both women and men.

JEL Classification: D13, D14, J16

Suggested Citation

Fonseca, Raquel and Mullen, Kathleen J. and Zamarro, Gema and Zissimopoulos, Julie M., What Explains the Gender Gap in Financial Literacy? The Role of Household Decision-Making (June 1, 2010). RAND Working Paper Series WR- 762. Available at SSRN: https://ssrn.com/abstract=1633689 or http://dx.doi.org/10.2139/ssrn.1633689

Raquel Fonseca (Contact Author)

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

Kathleen J. Mullen

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States
310-393-0411 x6265 (Phone)
310-260-8156 (Fax)

HOME PAGE: http://works.bepress.com/kathleen_mullen

Gema Zamarro

University of Arkansas - Department of Education Reform ( email )

201 Graduate Education Building
Fayetteville, AR 72701
United States

Center for Economic and Social Research (CESR) ( email )

635 Downey Way
Los Angeles, CA 90089-3332
United States

HOME PAGE: http://works.bepress.com/gema_zamarro/

Julie M. Zissimopoulos

University of Southern California - Sol Price School of Public Policy ( email )

Los Angeles, CA 90089-0626
United States

The RAND Corporation ( email )

P.O. Box 2138
1776 Main Street
Santa Monica, CA 90407-2138
United States

University of Southern California - Schaeffer Center for Health Policy and Economics ( email )

635 Downey Way
Los Angeles, CA 90089-3333
United States

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