Economic Condition and Financial Cognition

53 Pages Posted: 24 Jun 2019 Last revised: 26 May 2020

See all articles by Manthos D. Delis

Manthos D. Delis

Montpellier Business School

Emilios C. Galariotis

Audencia Business School

Jerome Monne

ESSCA School of Management

Date Written: June 18, 2019

Abstract

Are poor individuals trapped by being unable to make good financial decisions? We use a randomized controlled survey experiment to examine how prompting individuals to think about their personal economic condition (priming) affects their scores on a subsequent financial literacy quiz. We find that the marginal effect of poverty on financial literacy scores is 3.7 times higher for primed (treated) respondents compared to nonprimed ones. We also show that higher anxiety and shame are key explanations for our baseline results, and that no effects are observed for general cognitive abilities unrelated to financial management. Our findings shed light on how economic condition affects financial cognition, especially with regard to cognitive impediments led by negative emotions.

Keywords: Financial effects of poverty; Financial literacy; Priming; Cognitive impediment; Financial anxiety; Shame of poverty; Survey experiment

JEL Classification: G40; D90; D91; C83

Suggested Citation

Delis, Manthos D. and Galariotis, Emilios C. and Monne, Jerome, Economic Condition and Financial Cognition (June 18, 2019). Available at SSRN: https://ssrn.com/abstract=3405948 or http://dx.doi.org/10.2139/ssrn.3405948

Manthos D. Delis

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

Emilios C. Galariotis

Audencia Business School

8 Road Joneliere
BP 31222
Nantes Cedex 3, 44312
France

Jerome Monne (Contact Author)

ESSCA School of Management ( email )

BORDEAUX, 33000
France

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