The Effect of Financial Literacy on Policy Preferences: Evidence from Argentina

Abstract

In this paper, I study the role of economic knowledge in economic policy preferences. Previous studies emphasize a moderating effect of knowledge on issue attitudes, through its interaction with partisanship and self-interest. I argue that knowledge has a direct effect on policy preferences. With the evidence from the two surveys of 7,565 of Argentines, I show that people who score higher on the Global Financial Literacy and economic knowledge tests are more supportive for pro-market economic policies, such as elimination of trade barriers, elimination of subsidies, and integration into the world financial markets. My knowledge measures are not correlated with partisanship. I address the issue of confoundedness with self-interest by conducting analysis in two different contexts – economic boom and recession.

Keywords: knowledge, preferences, economic policies