Financial illiteracy and pension contributions: A field experiment on compound interest in China

• Main Author: SONG, Changcheng
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2020
• Subjects: Pension; Retirement savings; Financial Education; Exponential Growth Bias; China; Asian Studies; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/6516; https://ink.library.smu.edu.sg/context/lkcsb_research/article/7515/viewcontent/financial_illiteracy.pdf
• Institution: Singapore Management University

I conduct a field experiment to study the relationship between peoples’ misunderstanding of compound interest and their pension contributions in rural China. I find that explaining the concept of compound interest to subjects increased pension contributions by roughly 40%. The treatment effect is la...