Motivation

1. Financial Education and Economic Decisions: A Childhood InterventionŞule Alan Department of EconomicsUniversity of Essex, UKSedaErtaçDepartment of EconomicsKoç University, Turkey

2. Motivation • Vast literature on the association between financial literacy (measured via tasks and surveys) and financial outcomes. Hastings et al 2012. • Does financial literacy lead to better outcomes? Or, does being involved in financial matters lead to literacy? • Pinning down causality is necessary to make policy recommendations. • Is there evidence that financial education actually changes behavior and attitudes toward financial matters?. • Evidence on youth and adolescents: Most evidence has methodological problems (identification). Some improvement in financial knowledge.

3. What We Do • Preferences and Core attitudes behind financial decisions and outcomes • Patience/time-preference • Risk preference • Self-control • Perseverance/Grit • Self-discipline • Measure these attitudes, explore their correlates • Using random assignment to training, study whether these attitudes are malleable. • If so, short-long term?

4. 25 schools in different areas of Istanbul

5. Unit of Randomization: School

6. Design • Ministry of National Education approval and notification of over 100 state primary schools in Istanbul. • Project team finds willing teachers among those. First phase: 25 willing schools (more now), 80 teachers/classes (3.grade, age 8-9-10) • 15 schools are randomly assigned as “training in spring 2013”, 10 schools as “training in fall 2013” (phase-in design), unit of randomization: school • First phase impact measurement (8 week training) completed.

7. Why Istanbul? • Study is taking place in Istanbul, Turkey. • Most-populated city in Turkey (15 million residents) • Diverse socio-economic characteristics • Turkey is an important middle income country with a sophisticated financial system. • Strong two-tier primary education system. The wealthy generally send their children to private schools. • We work with state schools in Istanbul (lower socio-economic sample). • Primary school teacher is very important: generally students spend the first 4 years with the same teacher. • Will allow us to measure the impact of training when there is a long-term relationship between the teacher and the students.

8. Why Children? • Correlational evidence suggests that measured personality traits are often more predictive than standard measures of cognition for outcomes. Heckman (2011). • Outcomes related to financial literacy (general educational attainment, saving, planning for retirement, rational borrowing). • These are the primitives that are important for sound economic decision making: • Patience • Self-control • Perseverance/Grit • Self-discipline • If these traits are malleable, children represent our best-shot.

9. Training Material • Preparation of training material, IRB review and approval. • 8 weeks of training material, followed by another 8 weeks of more advance material. 1-2 hours a week. • 7 mini case studies coving topics (first 8 weeks) • Imagining future-self (forward-looking behavior) • Self control against temptation goods • Smart shopping • Forgoing today’s utility for higher utility in the future (patience) • Saving for a target • Developing commitment device to meet a saving target. • Taking initiative on behalf of a group (related to financial decisions)

10. Merve is saving for a backpack

11. Teacher Training • Full-day teacher training with the help of education psychologists (March 31, April 6, 2013) • Teachers are presented with the target concepts (delay of gratification, save for a target good) and are trained in how to convey the material • Sent off to teach kids within an 8-week period

12. Teacher Training

13. Impact Measurement: Multi-faceted Approach • Measure: • Children’s attitudes/behavior (e.g. patience) • Teachers’ attitudes/behavior (e.g. patience) • Collect data on other teacher characteristics (age, gender, tenure) • Collect rich data on the child and family, using: • Detailed information from the teacher (attitudes, behavior in class, family characteristics) • School grades • Parental assessments • Parental survey (e.g. about aspirations for the child)

14. Three Main Questions 1. Which factors influence and shape existing attitudes? Gender, family background, teacher characteristics, peer effects… 2. Can training lead to significant differences in measured attitudes (short- and longer-term)? Can it lead to changes in outcomes (e.g. grades)? 3. Are there factors that moderate the impact of education? • A certain type of teacher? • A certain type of student?

15. Measured Attitudes • Time preference/patience • Present-biased preferences (self-control problems) • Risk tolerance • Personality measures (Temperament Questionnaire: inhibitory control, attention control, frustration, fear,….)

16. Time Preference Elicitation The propensity to forgo a smaller-sooner reward for a larger-later reward.

17. Trade-off Between Two Future Rewards

18. Interdisciplinary Methodology • Incentivized tasks (toys, gifts) • Questionnaires/self-reports • Both for teachers and children

19. Self-Control and Commitment Device “Chocolate Game” • 6 chocolates to be received one week later • Elicit consumption plan to allocate chocolates to two subsequent days • Introduce a locked box to stay with teacher, to be opened only in the second day. • Offer to lock chocolates for the second day. • Yes or No? • If yes, how many? • 1 week later, chocolates are brought • Ask how many he/she would have liked to eat now, if he/she were unconstrained. If this is greater than available “1st day chocolates”, gets all available chocolates. If less than the available “1st day chocolates”, gets what he/she wants.

20. Risk Preference Elicitation Child given 5 tokens (1 token=1 gift) 50% investment x3 gifts “Risky bowl”: 50% 0 gifts! Tokens not put in risky bowl are safe. “How many will you place in the risky bowl?”

21. Risk Game

22. Teachers Similar tasks, different incentives For risk: • 15 TL, investment either tripled or lost. • Hypothetical large stake question. For time preference: • Hypothetical choice lists involving large amounts of money (Data collected before teachers learn about project!)

23. Of Particular Interest: Gender Gender: Very important in economic choices and outcomes • Risk-tolerance, competitiveness, leadership (Croson and Gneezy (2009), Ertac and Gurdal (2012)) • The development and correlates of gender differences in childhood (e.g. Andersen et al. (2012)) • The effect of financial literacy education on gender differences (women are less confident and less knowledgeable in financial matters, e.g. Almenberg and Dreber (2012))

24. Data • 2693 students • 48% female, 52% male • 58% 2013 spring trained, continuethisterm, 42% starting this term. Income Level (teacher’s report)

25. Results: Patience

26. Results: Patience Average Treatment Effects • Time 1: 0.58 gift (t-value=2.39) • “treatment students demanded 0.58 unit less gift to wait for 1 week from today” • Time 2: • 0.94 gift (t-value 3.27) • “treatment students demanded 0.94 unit less gift to wait for 1 week from 1 week later”

27. Treatment Effect by Gender

28. Heterogeneity: Gender, academic success and wealth • Larger effect on male students: • (0.71 gifts (t-value=2.49) • Effect on female students: • 0.43 gifts (t-value=1.76) • For time2 : • 1 gift and 0.88 gifts for males and females (t-values 2.85 and 3.16 respectively) • Larger effect on academically successful students: • High: 0.94 (t-value=3.02) • Mid: 0.90 (t-value=2.28) • 0.44 (t-value=0.82) • No difference between successful females and males, but no effect on medium and low success female students. • No effect of socio-economic status after controlling for school success.

29. Treatment Effect by School Success

30. Treatment Effect by Teacher Assessment

31. Chocolate Game Results 1. CONSUMPTION PLANS: • Untreated students are a little less patient (0.1 more chocolate planned for the first day, p<0.035) 2. DEMAND FOR A COMMITMENT DEVICE: • 72% said yes to the locked box (not much gender difference) • No treatment effect on whether to lock or not the chocolates. • But, a positive treatment effect for female students from a low socio-economic background. • 14% higher probability to opt for the locked box relative to the control. • Higher amount locked in (1) the treatment, (2) among the more risk-averse (3) among males, conditional on locking.

33. Patience, Time Consistency and Commitment • Correlation with patience: Students who are more patient in the time task are more likely to demand commitment • Classify students as “hyperbolic”, “exponential”, “hypobolic”, from multiple list time tasks: Hypobolic students are significantly less likely to demand the commitment device Hypobolic students commit a significantly lower amount conditional on locking.

34. Time Inconsistency and Demand for a Commitment Device

35. Actual Present Bias Defined as actual demand minus plan for day 1. For students who are completely free to choose (no commitment), males in treatment exhibit a significantly smaller present bias.

37. Upcoming Intervention and Measurements With 4th-graders (Fall 2013) • Training continues • More advanced financial training material Allows us to measure the impact of: • 8-week training • 16-week training with extra material One last measurement in June 2014 to measure longer-term impact

38. RTC Studies on Financial Education • Luhrman et al. (2012), Germany, high school. Improvement of financial knowledge. • Becchetti et al. (2011) and Becchetti and Pisani (2012), Italy, high school. Improvement of financial knowledge, but weak. • Bruhn, Legovini, Zia. Brazil, high school. Improvement of financial knowledge. • Berry, Karlan and Pradhan (2013), Ghana, primary and secondary schools (grades 5-7). Impact of financial education and access. • Our ultimate interest is improvement of behavior (long-term).