What Determines the Financial Literacy of Young People? An Analysis from PISA 2012

Abstract

This paper aims to disentangle the factors determining the financial skills of young people in order to inspire effective policies aimed at improving the financial literacy of the population. PISA 2012 data is used. Special attention is paid to the sample selection and simultaneity biases that threaten the internal validity of the estimations. Our results show that the most important determinants of financial literacy of students are mathematical skills. Household socioeconomic level also has a statistically significant effect. School management model (public versus private) does not display any significant effect on the promotion of the financial culture of students.

Keywords: Financial literacy, mathematical performance, school choice, selection bias, simultaneity bias, multilevel models, propensity score matching

JEL Classification: A21, D14, I20