Numeracy and wealth

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

Research output: Contribution to journalArticleScientificpeer-review

15 Citations (Scopus)

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