Sarah Necker, Ludwig Erhard ifo Center for Social Market Economy and Institutional Economics
Economic Literacy: Measurement, Expectations, and Policy Views
Abstract:
We study the population’s economic literacy – the understanding of basic economic concepts – and its importance for the formation of economic expectations and policy views. We devise and implement a survey module to measure economic literacy in a representative adult population. Psychometric analysis supports the reliability and validity of the test instrument. While associated with education and intelligence, economic literacy captures a distinct cognitive skill. Economic literacy differs substantially by gender and socioeconomic background and increases strongly with age, consistent with acquisition over the life course, but it is unrelated to ideological orientation and party support. Three analyses are consistent with economic literacy enabling voters to improve information processing and form policy views more consistent with their underlying preferences. First, individuals with higher economic literacy form better-anchored economic expectations. Second, more economically literate individuals are more responsive to experimentally provided information on policy trade-offs. Third, economic literacy is related to a closer alignment between voters’ preferences, policy views, and party choices.
Sarah Necker is professor for economics at the University of Nürnberg-Erlangen and heads the ifo Research Center for the Social Market Economy and Institutional Economics in Fürth. Her research is mainly empirical and focuses on topics in public and labour economics. She is particularly interested in the determinants of unethical or illegal behaviour, e.g. tax evasion.
Dr. Sarah Necker is a ZEW Research Associate. She works in close cooperation with the research unit “Corporate Taxation and Public Finance”.
You can read more about Sarah Necker and her research here
CEBI contact: Johan Sæverud