Dan Mihai Dima

Bucharest University of Economic Studies and Institute for Economic Forecasting, Romanian Academy; dan.dima@fin.ase.ro

Abstract:
This study investigates distributional heterogeneity in the relationship between financial literacy and demand-side financial development across Europe. Using microdata from Eurobarometer Flash Survey 525 (N = 24,356), we construct a latent household-level financial development variable via Polychoric Principal Component Analysis and Item Response Theory, then apply conditional quantile regression to estimate how the effect of financial literacy varies across the full distribution of household financial engagement. We document a structural „sticky floor”: below the 20th percentile, financial literacy has no statistically discernible effect on financial development, reflecting a non-responsive zone driven by supply-side barriers rather than knowledge deficits. Above this zone, the marginal effect of financial literacy increases monotonically through the upper-middle quantiles before attenuating at the top – consistent with product saturation. A comparative analysis of Eastern and Western European subsamples reveals that this non-responsive zone extends significantly deeper in transition economies, where literacy effects remain statistically dormant until approximately the 40th percentile. These findings challenge the universalist framing of financial education policy and argue for sequenced interventions that prioritize structural access before broad-based literacy campaigns.

Zoom:
https://ase.zoom.us/j/88975840175?pwd=Q0ZnbHl0TjhqcEtzVnhMUWRmdWdPQT09

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