Two Essays on Empirical Studies of Financial Literacy in Taiwan

In This study, we follow Chung-Hua Shen, Shih-Jie Lin, De-Piao Tang, and Yu-Jen Hsiao(2015a,2015b) and use Logit regression model for Third Undertaken National Financial Literacy survey in 2011 by Financial Supervisory Commission(FSC) in Taiwan to examine the relationship between self-control, financial literacy and harmful consumer credit behavior. Lack self-control and financial illiteracy are positively associated with consumer over-indebtness and consumer cash advance. It means that people with lack self-control or financial illiteracy are more likely to suffer consumer credit problems. In most specifications we find a stronger role for lack of self-control than financial illiteracy in explaining consumer over-indebtness. This study also examines financial literacy and its relationship with financial disputes that have rarely been discussed in other studies. Our empirical evidence suggests that people with a higher financial literacy are less likely to experience financial disputes. When the purchase of financial products and services leads to a financial dispute, people with a higher financial literacy will aggressively handle the problem. In addition, physiological characteristics, like gender, marriage status, education level, family origin and household income, are also key factors affecting the chance to suffer consumer credit and financial disputes. Finally, our results are robustness to the potentially endogeneity and selection bias issue ,and show that our conclusions are useful for the government, practitioners, and the public.