ISSN: 2225-8329
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In recent years, as the complexity of household financial decision-making has increased, there has been an increasing focus on the impact of financial literacy and the confidence bias of financial literacy on household economic behavior. This paper explores the impact of subjective financial literacy and the confidence bias of financial literacy on household consumption from their perspectives and further analyzes the underlying mechanism. Different from previous studies that mainly focus on objective financial literacy, this paper introduces household subjective financial literacy and its deviation from objective financial literacy, constructs a financial literacy confidence bias indicator, and conducts empirical analysis based on nationally representative microdata. It is found that: (1) Both subjective and objective financial literacy of households have a significant positive impact on household consumption level, and the impact effect of subjective financial literacy is more significant; (2) Financial literacy confidence bias has a positive promoting effect on household consumption. Both overconfident and underconfident families show higher consumption levels. Overconfident families have more significant increases in developmental and enjoyment consumption, while underconfident families tend to focus more on survival consumption;(3) Financial literacy confidence bias indirectly contributes to household consumption levels by affecting the proportion of household risk preferences and financial asset allocations, both of which play a part in mediating the effect. This paper expands the theoretical boundaries of the study of financial literacy on household economic behavior from the perspectives of subjective cognition and psychological bias, enriches the empirical evidence of the influencing factors of household consumption, and provides policy insights for improving the quality of residents' financial literacy and optimizing household consumption.
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