Unshrouding product-specific attributes through financial education
53 Pages Posted: 8 Feb 2020 Last revised: 17 Aug 2020
Date Written: August 17, 2020
We estimate the impact of a product-specific education video on the intention to purchase a shrouded, sub-optimal insurance product in India. Our intervention results in a significant decline in potential demand, preventing welfare losses to newly-informed consumers; however, these benefits may come at the cost of other non-educated consumers if equilibrium outcomes remain unaltered by our intervention. Using a model of shrouded attributes in product markets with financial education, we characterize the size of treatment effects required to result in an unshrouded market equilibrium. Only for a narrow set of parameter values, our experiment results in a market equilibrium with fair prices. Positive effects of financial education may be necessary, but not a sufficient condition to improve overall welfare in retail financial markets.
Keywords: financial education, financial literacy, household finance
JEL Classification: G22, G5, G52
Suggested Citation: Suggested Citation