Hostname: page-component-cd9895bd7-jkksz Total loading time: 0 Render date: 2024-12-29T08:21:21.289Z Has data issue: false hasContentIssue false
  • English
  • Français

Voting in the aftermath of a pension reform: the role of financial literacy

Published online by Cambridge University Press:  24 July 2018

ELSA FORNERO  and
ANNA LO PRETE
ELSA FORNERO
Affiliation:
University of Torino and CeRP – Collegio Carlo Alberto, Torino, Italy (e-mail: [email protected])
ANNA LO PRETE
Affiliation:
University of Torino and CeRP – Collegio Carlo Alberto, Torino, Italy (e-mail: [email protected])
Get access Rights & Permissions [Opens in a new window]

Abstract

This study documents that the electoral cost of major pension reforms is lower in countries where the level of financial literacy is higher. The evidence from data on legislative elections held between 1990 and 2010 in 21 advanced countries is robust when we control for macroeconomic, demographic, and political conditions. Interestingly, these findings are not robust when we use less specific indicators of human capital as general schooling, supporting the view that knowledge of basic economic and financial concepts has distinctive features that may help reduce the electoral cost of reforms having a relevant impact on the life cycle of individuals.

Keywords

D72H5I2Pension systemsreformsre-electionfinancial literacy
Type
Article
Information
Journal of Pension Economics & Finance , Volume 18 , Issue 1 , January 2019 , pp. 1 - 30
Copyright
Copyright © Cambridge University Press 2018 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We thank: Roel Beetsma, Anne Lavigne, Muriel Roger, and Giovanni Gallo for their constructive comments; participants in the Netspar International Pension Workshop (Leiden, January 2017), «La Sapienza» seminar (Rome, February 2017), the 10th Financial Risks International Forum (Paris, March 2017), the Workshop on Household Finance and Economic Behaviour (Turin, May 2017), the 15th International Conference on Pension, Insurance and Saving (Paris, May 2017), and the Workshop on Retirement: Public Policy Evaluation (Annecy, June 2017) for useful discussion; Antoine Bozio, Tabea Bucher-Koenen, Agnieszka Chlon-Dominczak, Robert Gal, Robert Holzmann, Mauro Mastrogiacomo, Theo Nijman, Ed Palmer, Steinar Strøm, Tarmo Valkonen, Frank Vandenbroucke for their help on specific pension reforms; the referees and the editor for helpful comments and suggestions. The usual disclaimer applies.

References

Alesina, A., Ardagna, S., and Trebbi, F. (2006) Who adjusts and when? The political economy of reforms. IMF Staff Papers, 53: 1–29.Google Scholar
Alesina, A., Carloni, D., and Lecce, G. (2013) The electoral consequences of large fiscal adjustments. In Alesina, A. and Giavazzi, F. (eds), Fiscal Policy after the Financial Crisis. Chicago: The University of Chicago Press, pp. 531–570.Google Scholar
Angrist, J. D. and Pischke, J.-S. (2009) Mostly Harmless Econometrics. New Jersey: Princeton University Press.Google Scholar
Barro, R. and Lee, J.-W. (2013) A new data Set of educational attainment in the world, 1950–2010. Journal of Development Economics, 104: 184–198.Google Scholar
Baum, C. F., Schaffer, M. E., and Stillman, S. (2007) Enhanced Routines for Instrumental Variables/GMM Estimation and Testing. Boston College Economics Working Paper No. 667.Google Scholar
Beck, T., Clarke, G., Groff, A., Keefer, P., and Walsh, P. (2001) New tools in comparative political economy: the database of political institutions. World Bank Economic Review, 15(1): 165–176.Google Scholar
Bonfiglioli, A. and Gancia, G. (2016). Economic Uncertainty and Structural Reforms. Universitat Pompeu Fabra Economics Working Paper No. 1494.Google Scholar
Bonoli, G. (1997) Classifying welfare states: a two-dimension approach. Journal of Social Policy, 26(3): 351–372.Google Scholar
Brender, A. and Drazen, A. (2008) How do budget deficits and economic growth affect reelection prospects? Evidence from a large panel of countries. American Economic Review, 98(5): 2203–2220.Google Scholar
Bucher-Koenen, T. and Lusardi, A. (2011) Financial literacy and retirement planning in Germany. Journal of Pension Economics and Finance, 10(4): 565–584.Google Scholar
Buti, M., Turrini, A., Van den Noord, P., and Biroli, P. (2010) Reforms and re-elections in OECD countries. Economic Policy, 25(1): 61–116.Google Scholar
Chong, D. and Druckman, J. N. (2007) Framing theory. Annual Review of Political Science, 10: 103–126.Google Scholar
Cruz, C., Keefer, P., and Scartascini, C. (2016) Database of political institutions codebook, 2015 update (DPI2015). Inter-American Development Bank. Available online at https://publications.iadb.org/handle/11319/7408.Google Scholar
De Mello, L., Schotte, S., Tiongson, E., and Winkler, H. (2014). Political Economy Issues in Aging Societies of Europe and Central Asia. Background paper for Golden Aging, Washington, DC: World Bank.Google Scholar
Dias da Silva, A., Givone, A., and Sondermann, D. (2017). When Do Countries Implement Structural Reforms? ECB Working Paper 2078.Google Scholar
Duval, R. (2008) Is there a role for macroeconomic policy in fostering structural reforms? Panel evidence from OECD countries over the past two decades. European Journal of Political Economy, 24(2): 491–502.Google Scholar
Esping-Andersen, G. (1990). Three Worlds of Welfare Capitalism. Cambridge: Polity Press.Google Scholar
Fair, R. C. (1978) The effect of economic events on votes for president. Review of Economics and Statistics, 60(2): 159–173.Google Scholar
Ferrera, M. (1996) The ‘Southern Model’ of welfare in social Europe. Journal of European Social Policy, 6(1): 17–37.Google Scholar
Fontoura Gouveia, A. (2017) Political support for reforms of the pension system: two experiments. Journal of Pensions and Finance, 16(3): 371–394.Google Scholar
Fornero, E. and Monticone, C. (2011) Financial literacy and pension plan participation in Italy. Journal of Pension Economics and Finance, 10: 547–564.Google Scholar
Giofré, M. (2017) Financial education, investor protection and international portfolio diversification. Journal of International Money and Finance, 71: 111–139.Google Scholar
Glenn, N. D. and Grimes, M. (1968) Aging, voting, and political interest. American Sociological Review, 35(4): 563–575.Google Scholar
Gordon, L. C., Munnell, A. H., and Orszag, J. M. (2006) The Oxford Handbook of Pensions and Retirement Income: Volume 13. Oxford: Oxford University Press.Google Scholar
Guiso, L. and Jappelli, T. (2009) ‘Financial Literacy and Portfolio Diversification’, CSEF Working Papers 212, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.Google Scholar
Jappelli, T. (2010) Economic literacy: an international comparison. Economic Journal, 120: F429–F451.Google Scholar
Katrougalos, G. and Lazaridis, G (2003) Southern European Welfare States: Problems, Challenges and Prospects. New York: Palgrave Macmillan.Google Scholar
Lo Prete, A. (2013) Economic literacy, inequality, and financial development. Economics Letters, 118(1): 74–76.Google Scholar
Lo Prete, A. (2018) Inequality and the finance you know: does economic literacy matter? Economa Politica, 35(1): 183–205.Google Scholar
Lusardi, A. and Mitchell, O. (2007) Baby Boomer Retirement Security: the roles of planning, financial literacy, and housing wealth. Journal of Monetary Economics, 54(1): 205–224.Google Scholar
Lusardi, A. and Mitchell, O. S. (2014) The economic importance of financial literacy: theory and evidence. Journal of Economic Literature, 52(1): 5–44.Google Scholar
Montagnoli, A., Moro, M., Panos, G. A., and Wright, R. E. (2017). Financial Literacy and Attitudes to Redistribution. Business School – Economics, University of Glasgow Working Paper No. 2017_03.Google Scholar
OECD (2015). National Strategies for Financial Education: OECD/INFE Policy Handbook.Google Scholar
OECD (2016). Mathematics Performance (PISA) (Indicator). Online database.Google Scholar
OECD (2017). PISA 2015 Results (Vol. IV): Students’ Financial Literacy.Google Scholar
Prati, A., Onorato, M. G., and Papageorgiou, C. (2013) Which reforms work and under what institutional environment? Evidence from a new data set on structural reforms. Review of Economics and Statistics, 95(3): 946–968.Google Scholar
Staiger, D. and Stock, J. H. (1997) Instrumental variables regression with weak instruments. Econometrica, 65(3): 557–586.Google Scholar
Van Rooij, M., Lusardi, A., and Alessie, R. (2011) Financial literacy and stock market participation. Journal of Financial Economics, 101: 449–472.Google Scholar
Wooldridge, J. M. (2010). Econometric Analysis of Cross Section and Panel Data, Second Edition. Cambridge: MIT Press.Google Scholar
Supplementary material: PDF

Fornero and Lo Prete supplementary material

Fornero and Lo Prete supplementary material 1

Download Fornero and Lo Prete supplementary material(PDF)
PDF 134.8 KB