How Does Financial Literacy Affect Household Consumption?
WANG Zhili1, WANG Haiyan2
1. Department of Public Management, The Party School of the CPC Henan Provincial Committee, Zhengzhou 451464, China; 2. Department of Economics, The Party School of the CPC Henan Provincial Committee, Zhengzhou 451464, China
Abstract Based on the China Family Panel Studies (CFPS) databases in 2014 and 2018, this study employs ordinary least squares (OLS) and mediation effect models to examine the impact of financial literacy on household consumption and its underlying mechanisms. This study yields the following main findings: First, improved financial literacy promotes household consumption, and this positive effect survives rigorous tests for endogeneity and robustness. Second, dimensional analysis reveals that financial literacy not only boosts survival-oriented consumption but also facilitates development-and enjoyment-oriented consumption, thereby promoting the upgrading of consumption structure. However, while basic financial literacy shows a significant consumption-promoting effect, advanced financial literacy does not exhibit a statistically significant effect. Third, mechanism tests indicate that financial literacy positively influences household consumption primarily through three channels: alleviating liquidity constraints faced by households, reducing household uncertainty and guiding households to formulate longterm financial plans. Fourth, heterogeneity tests demonstrate that the impact of financial literacy on household consumption is asymmetric across urban and rural areas, genders, age groups and income strata. The consumption-promoting effect of financial literacy is more pronounced among women in urban areas, households with members under 60 years old and middle-income groups.The policy implication of the study lies in cultivating residents’ financial literacy to fully unleash consumption potential.
2026, Vol. 43 
