Essays on Household Financial Decision-Making

This thesis is a collection of four self-contained papers on topics related to household economic behavior and financial decision-making. Chapter 1 examines how specific knowledge – namely pension and financial literacy – affects retirement saving decisions. Using an instrumental variable approach, we show that understanding how the pension system works is the most influential factor in driving these decisions. Chapter 2 investigates how household consumption and investment behavior changes following an anticipated increase in disposable income, such as the end of mortgage payments. I find that households do not smooth consumption: they increase spending on non-durable goods without adjusting their saving behavior. In terms of portfolio composition, only bond holdings are significantly affected. Chapter 3 focuses on Socially Responsible Investment (SRI), analyzing how interest in these products is shaped by both economic and non-economic characteristics. I find that personality traits – such as openness to experience, agreeableness, and conscientiousness – as well as economic preferences like risk aversion and saving regret, are key drivers of engagement with SRI. Chapter 4 explores how financial literacy influences the intention to invest in sustainable products in Italy. We find that more financially literate individuals are both more aware of sustainable investing and more likely to intend to choose such products. Their choices also appear more informed: they are willing to accept lower financial returns to invest in SR products, but are less willing to choose products that redirect all returns to social or environmental causes, likely viewing them as sub-optimal.