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Voting in the Aftermath of a Pension Reform: The Role of Financial Literacy

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Abstract
Economic reforms affecting people’s lives are generally quite unpopular and may imply an electoral cost. This can derive, among other things, from lack of understanding of the basic elements of reforms. Our paper shows that the electoral cost of a pension reform is significantly 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 macro-economic conditions, demographic factors, and characteristics of the political system. Interestingly, these findings are not robust when we use less specific indicators of human capital – such 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.

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  • Fornero, Elsa & Lo Prete, Anna, 2017. "Voting in the Aftermath of a Pension Reform: The Role of Financial Literacy," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201723, University of Turin.
    • Handle: RePEc:uto:dipeco:201723
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    Cited by:

    1. De Santis Gustavo, 2024. "Demography, Economy and Policy Choices: The Three Corners of the Pension Conundrum," Statistics, Politics and Policy, De Gruyter, vol. 15(2), pages 169-200.
    2. Schuetz, Jana & Uebelmesser, Silke & Baginski, Ronja & Aprea, Carmela, 2023. "Pension reform preferences in Germany: Does information matter?," European Journal of Political Economy, Elsevier, vol. 80(C).
    3. Jante Parlevliet & Massimo Giuliodori & Matthijs Rooduijn, 2023. "Populist attitudes, fiscal illusion and fiscal preferences: evidence from Dutch households," Public Choice, Springer, vol. 197(1), pages 201-225, October.
    4. Robert Holzmann, 2017. "The ABCs of nonfinancial defined contribution (NDC) schemes," International Social Security Review, John Wiley & Sons, vol. 70(3), pages 53-77, July.
    5. Samuele Murtinu & Giulio Piccirilli & Agnese Sacchi, 2022. "Rational inattention and politics: how parties use fiscal policies to manipulate voters," Public Choice, Springer, vol. 190(3), pages 365-386, March.
    6. Sonia Buchholtz & Jan Gąska & Marek Góra, 2021. "Myopic Savings Behaviour of Future Polish Pensioners," Risks, MDPI, vol. 9(2), pages 1-19, February.
    7. Beatrice Magistro, 2022. "The influence of financial and economic literacy on policy preferences in Italy," Economics and Politics, Wiley Blackwell, vol. 34(2), pages 351-381, July.
    8. Jana Schuetz, 2024. "Beliefs about the Gender Pension Gap," Jena Economics Research Papers 2024-004, Friedrich-Schiller-University Jena.
    9. Anna Lo Prete, 2018. "Inequality and the finance you know: does economic literacy matter?," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(1), pages 183-205, April.
    10. Susanna Levantesi & Giulia Zacchia, 2021. "Machine Learning and Financial Literacy: An Exploration of Factors Influencing Financial Knowledge in Italy," JRFM, MDPI, vol. 14(3), pages 1-21, March.
    11. Bellocchi, Alessandro & Travaglini, Giuseppe, 2024. "Financial literacy, uncertainty and costs of education," Economics Letters, Elsevier, vol. 238(C).
    12. Jante Parlevliet & Massimo Giuliodori & Matthijs Rooduijn, 2021. "Populist attitudes, fiscal illusion and fiscal preferences: evidence from Dutch households," Working Papers 731, DNB.
    13. Beatrice Magistro, 2020. "Financial literacy and support for free trade in the UK," The World Economy, Wiley Blackwell, vol. 43(8), pages 2050-2069, August.
    14. Lo Prete, Anna, 2024. "Digital and financial literacy and the development of e-government platforms," Department of Economics and Statistics Cognetti de Martiis. Working Papers 202411, University of Turin.
    15. Lo Prete, Anna, 2021. "Financial literacy, education, and voter turnout," Department of Economics and Statistics Cognetti de Martiis. Working Papers 202105, University of Turin.
    16. Lo Prete, Anna, 2024. "Political participation and financial education: understanding personal and collective tradeoffs for a better citizenship," Department of Economics and Statistics Cognetti de Martiis. Working Papers 202418, University of Turin.
    17. Lucia Rossel Flores & Martijn Huysmans & Joras Ferwerda, 2024. "The political business cycle of tax reforms," Public Choice, Springer, vol. 200(1), pages 65-88, July.
    18. Elisa Stumpf & Jana Schuetz & Silke Uebelmesser & Ronja Baginski & Carmela Aprea, 2024. "Beliefs about demographic change: How well are individuals informed?," Jena Economics Research Papers 2024-003, Friedrich-Schiller-University Jena.
    19. Buchholtz, Sonia & Gaska, Jan & Góra, Marek, 2018. "Pension Strategies of Workers in a Country Getting Old before Getting Rich," IZA Discussion Papers 11830, Institute of Labor Economics (IZA).
    20. Daniele Franco & Pietro Tommasino, 2020. "Lessons From Italy: A Good Pension System Needs an Effective Broader Social Policy Framework," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 55(2), pages 73-81, March.

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