Skills and household financial decision-making in Indonesia

Research output: Contribution to journalArticlepeer-review

Abstract

Purpose: This study examines whether financial literacy is a relevant factor that determines authority in household financial decision-making, an area that is often viewed as boring, difficult and full of uncertainties. Cognitive ability and personality traits are also included as additional explanatory variables. Design/methodology/approach: The logistic regression technique was applied using a sample of more than 2,300 microfinance institutions' clients in three provinces in Indonesia. Findings: This study finds that financial literacy correlates positively with authority in household financial decision-making only among men. This does not mean that financial literacy is irrelevant for women's agency, since the skill might be important for authorities in other decision-making areas, including those outside households. Meanwhile, the relationship between cognitive ability and household financial decision-making authority is more universal. Research limitations/implications: This study does not collect information on the levels of financial literacy of other household members and does not capture respondents' perceptions of household financial decision-making. Social implications: The overall low level of financial literacy calls for the need for more targeted efforts to address this issue by policymakers. Education policy should also be designed to improve cognitive ability, as this ability is important for human agency and well-being. Originality/value: Household decision-making has received significant attention in the literature. Authority in household decision-making is important because it represents a person's agency and has a profound impact on well-being. To the best of author's knowledge, studies on the importance of skills in household financial decision-making are very limited.

Original languageEnglish
JournalInternational Journal of Social Economics
DOIs
Publication statusAccepted/In press - 2020

Keywords

  • Cognitive ability
  • Financial decision-making authority
  • Financial literacy
  • Indonesia
  • Personality traits

Fingerprint Dive into the research topics of 'Skills and household financial decision-making in Indonesia'. Together they form a unique fingerprint.

Cite this