On the Gender Gap in Financial Knowledge: Decomposing the Effects of Don't Know and Incorrect Responses*

Abstract

Objectives Past studies have consistently shown that women have lower levels of financial knowledge than men, and hence there is a noticeable gender gap in financial knowledge. We reconsider the conventional measures of financial knowledge by disentangling don't know (DK) responses and incorrect answers and comparing the effect of these two disparate responses’ on the gender gap in financial knowledge. Methods Using data from the 2012 National Financial Capability Studies data set, we estimate a series of ordinary least squares regression and multinomial logit models of the gender gap in DK and incorrect responses. Results We find a strong gender gap in financial knowledge, but with a twist: (1) men are more likely to offer correct answers; (2) women are slightly more likely to offer incorrect answers; but (3) women are considerably more likely to provide DK responses. Hence women may exhibit lower levels of financial knowledge because they lose the opportunity to hazard a guess and arrive at a correct answer based either on partial knowledge or on random chance. We consider the possibility that there are psychological processes at work involving risk acceptance and confidence in financial knowledge that prompt women to give DK responses at a rate higher than men. Conclusion We suggest that future research should consider the relative roles of DK and incorrect responses in measuring financial knowledge.

Do Women Behave Financially Worse than Men? Evidence from Married and Cohabiting Couples

“…However, there is an emerging strand of literature suggesting that gender differences in financial literacy scores may be attributable to measurement inaccuracy or may arise from distinct ways in which women and men respond to test questions. When accounted for different nature of incorrect and "Don't know" responses, financial literacy quizzes show a considerably smaller gender gap in test scores or the absence of a significant gender difference altogether (Bucher-Koenen, Alessie, Lusardi, & van Rooij, 2016;Z. Chen & Garand, 2018;Kim & Mountain, 2019;Ooi, 2020).…”

“…A greater inclination to select the "Don't know" response can also mask higher risk aversion of women (Z Chen & Garand, 2018;Lizotte & Sidman, 2009)…”

Consumer debt attitudes: The role of gender, debt knowledge and skills

“…In this study, debt knowledge was captured with a targeted instrument comprising 12 “Yes/No” questions. The option “Don't know” was intentionally omitted following the results of previous studies, which show a likely illusory gender gap in financial literacy resulting from (a) lower self‐confidence and (b) decreased inclination to make informed guesses among females (e.g., Chen & Garand, ; Lusardi & Mitchell, ). This decision was also supported by the conclusions of Krosnick and Presser () that “Don't know” filters—despite having some advantages—in general, do not improve measurement.…”

Does Social Capital Influence Debt Literacy? The Case of Facebook Users in Poland

“…Some studies show, however, that the gap may be illusory, at least to a degree, as women tend to select the 'Don't know' option more often than men, ending up with worse financial literacy scores, because this option is routinely counted as indicating lack of knowledge. Men, instead, seem to gamble more frequently than women, and make an informed guess (Chen and Garand, 2018). Moreover, it was also found that women are less financially confident than men -they may know less than men, but they know more than they think they know .…”