Gender differences in financial literacy: The role of stereotype threat

Gustav Tinghög,Ali Ahmed,Kinga Barrafrem,Thérèse Lind,Kenny Skagerlund,Daniel Västfjäll

doi:10.1016/j.jebo.2021.10.015

Gustav Tinghög, Ali Ahmed + Show 4 more

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https://doi.org/10.1016/j.jebo.2021.10.015

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Abstract

Understanding why women display less financial literacy than men is crucial for developing policies to reduce gender inequalities and improve women's financial behavior. In a series of studies, we investigate whether the observed gender gap in financial literacy can be identified in nonnumerical contexts, if it can be related to confidence in financial matters, and if it can be attributed to stereotype threat, which posits that inbuilt prejudices about gender and finance undermine performance among women in tasks involving finance. We utilized data from the Swedish Standardized Scholastic Aptitude Test (n = 40,662) to investigate if there is a greater difference in reading comprehension between men and women when reading about topics related to finance. Furthermore, we conducted large-scale online data collection (n = 1989), including a survey on financial vocabulary and an experiment that manipulated the salience of the financial content across conditions when assessing financial literacy. The results show that the observed gender gap in financial literacy is robust also in a nonnumerical financial contexts and that it can not be attributed to a difference in (displayed) confidence. Finally, mediation analysis showed a significant indirect effect of gender on financial literacy through financial anxiety suggesting that a stereotype threat for women in the financial domain contributes to the observed gender gap.

Highlights

A persistent gender gap, in which men do better than women, is usually observed in financial literacy across the world (Bucher-Koenen et al, 2017; Fonseca et al, 2012; Lind et al, 2020; Lusardi and Mitchell, 2008)
Since reading comprehension is supposed to test the ability to understand the general content of a text, the results show that the gender differences observed in financial literacy extends to nonnumerical financial contexts
Since stereotype beliefs is especially salient for women in the mathematical domain (Schmader, 2002; Spencer et al, 1999), separating the effects of understanding financial terms from the numerical nature of the standard financial literacy questions becomes difficult

Summary

Introduction

A persistent gender gap, in which men do better than women, is usually observed in financial literacy across the world (Bucher-Koenen et al, 2017; Fonseca et al, 2012; Lind et al, 2020; Lusardi and Mitchell, 2008). This gender gap is puzzling, in industrialized societies, where more women than men attend college and university (Wells et al, 2011). Systematic differences between men and women in financial literacy imply that women have poorer odds to prevail in the financial markets. Understanding why and when this gender gap in financial literacy arises is crucial for developing policies aimed at reducing gender inequalities and improving women’s financial behavior

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