Numeracy and wealth

C. Estrada-Mejia, M. de Vries, M. Zeelenberg

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Numeracy is defined as the ability to understand and use numerical information. We examined the relationship between numeracy and wealth using a cross-sectional and a longitudinal study. For a sample of approximately 1000 Dutch adults, we found a statistically significant correlation between numeracy and wealth, even after controlling for differences in education, risk preferences, beliefs about future income, financial knowledge, need for cognition or seeking financial advice. Conditional on socio-demographic characteristics, our estimates suggest that on average a one-point increase in the numeracy score (11-point scale) of the respondent is associated with 5 percent more personal wealth. Additionally, we find that numeracy is a key determinant of the wealth accumulation trajectories that people follow over time. Over a 5-year period, while participants with low numeracy decumulate wealth, participants with high numeracy maintain a constant positive level of wealth.

Keywords:Numeracy, Cognitive ability, Wealth,Wealth accumulation

Original languageEnglish
Pages (from-to)53-63
JournalJournal of Economic Psychology
Volume54
DOIs
Publication statusPublished - 2016

Keywords

  • Numeracy
  • Cognitive ability
  • Wealth
  • Wealth accumulation
  • FINANCIAL DECISION-MAKING
  • COGNITIVE-ABILITIES
  • RISK
  • LITERACY
  • COMPREHENSION
  • DETERMINANTS
  • ACCUMULATION
  • PREFERENCES
  • ASTERISK
  • HEALTH

Cite this

Estrada-Mejia, C. ; de Vries, M. ; Zeelenberg, M. / Numeracy and wealth. In: Journal of Economic Psychology. 2016 ; Vol. 54. pp. 53-63.
@article{31c427d2da78449d81ec12e4071ff1c7,
title = "Numeracy and wealth",
abstract = "Numeracy is defined as the ability to understand and use numerical information. We examined the relationship between numeracy and wealth using a cross-sectional and a longitudinal study. For a sample of approximately 1000 Dutch adults, we found a statistically significant correlation between numeracy and wealth, even after controlling for differences in education, risk preferences, beliefs about future income, financial knowledge, need for cognition or seeking financial advice. Conditional on socio-demographic characteristics, our estimates suggest that on average a one-point increase in the numeracy score (11-point scale) of the respondent is associated with 5 percent more personal wealth. Additionally, we find that numeracy is a key determinant of the wealth accumulation trajectories that people follow over time. Over a 5-year period, while participants with low numeracy decumulate wealth, participants with high numeracy maintain a constant positive level of wealth. Keywords:Numeracy, Cognitive ability, Wealth,Wealth accumulation",
keywords = "Numeracy, Cognitive ability, Wealth, Wealth accumulation, FINANCIAL DECISION-MAKING, COGNITIVE-ABILITIES, RISK, LITERACY, COMPREHENSION, DETERMINANTS, ACCUMULATION, PREFERENCES, ASTERISK, HEALTH",
author = "C. Estrada-Mejia and {de Vries}, M. and M. Zeelenberg",
year = "2016",
doi = "10.1016/j.joep.2016.02.011",
language = "English",
volume = "54",
pages = "53--63",
journal = "Journal of Economic Psychology",
issn = "0167-4870",
publisher = "Elsevier Science BV",

}

Numeracy and wealth. / Estrada-Mejia, C.; de Vries, M.; Zeelenberg, M.

In: Journal of Economic Psychology, Vol. 54, 2016, p. 53-63.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

T1 - Numeracy and wealth

AU - Estrada-Mejia, C.

AU - de Vries, M.

AU - Zeelenberg, M.

PY - 2016

Y1 - 2016

N2 - Numeracy is defined as the ability to understand and use numerical information. We examined the relationship between numeracy and wealth using a cross-sectional and a longitudinal study. For a sample of approximately 1000 Dutch adults, we found a statistically significant correlation between numeracy and wealth, even after controlling for differences in education, risk preferences, beliefs about future income, financial knowledge, need for cognition or seeking financial advice. Conditional on socio-demographic characteristics, our estimates suggest that on average a one-point increase in the numeracy score (11-point scale) of the respondent is associated with 5 percent more personal wealth. Additionally, we find that numeracy is a key determinant of the wealth accumulation trajectories that people follow over time. Over a 5-year period, while participants with low numeracy decumulate wealth, participants with high numeracy maintain a constant positive level of wealth. Keywords:Numeracy, Cognitive ability, Wealth,Wealth accumulation

AB - Numeracy is defined as the ability to understand and use numerical information. We examined the relationship between numeracy and wealth using a cross-sectional and a longitudinal study. For a sample of approximately 1000 Dutch adults, we found a statistically significant correlation between numeracy and wealth, even after controlling for differences in education, risk preferences, beliefs about future income, financial knowledge, need for cognition or seeking financial advice. Conditional on socio-demographic characteristics, our estimates suggest that on average a one-point increase in the numeracy score (11-point scale) of the respondent is associated with 5 percent more personal wealth. Additionally, we find that numeracy is a key determinant of the wealth accumulation trajectories that people follow over time. Over a 5-year period, while participants with low numeracy decumulate wealth, participants with high numeracy maintain a constant positive level of wealth. Keywords:Numeracy, Cognitive ability, Wealth,Wealth accumulation

KW - Numeracy

KW - Cognitive ability

KW - Wealth

KW - Wealth accumulation

KW - FINANCIAL DECISION-MAKING

KW - COGNITIVE-ABILITIES

KW - RISK

KW - LITERACY

KW - COMPREHENSION

KW - DETERMINANTS

KW - ACCUMULATION

KW - PREFERENCES

KW - ASTERISK

KW - HEALTH

U2 - 10.1016/j.joep.2016.02.011

DO - 10.1016/j.joep.2016.02.011

M3 - Article

VL - 54

SP - 53

EP - 63

JO - Journal of Economic Psychology

JF - Journal of Economic Psychology

SN - 0167-4870

ER -