Determination of the Financial Literacy Characteristics of Prisoners: The Case of Turkey, a Developing Country

Abstract

Increasing crime rates and prison occupancy are major problems for every country. Previous studies were conducted in countries with high national incomes. Therefore, there is a gap in the literature as to whether different results can be achieved in countries with different income levels. For this reason we aimed to determine whether the level of financial literacy differs between types of crimes, and, if there is a difference, which types of crimes are associated with low financial literacy. The quantitative data set consists of a survey conducted in February 2020, with 670 out of the 712 convicts incarcerated in the Manisa E-type closed penal institution in western Turkey who agreed to respond. Within the scope of the study, the basic and sophisticated financial literacy of convicts were measured and then basic and sophisticated literacy indices were created. There are 3 hypotheses in this context. H1: The convicts have lower financial literacy than the general public hypothesis is not rejected. H2: The level of basic financial literacy of convicts varies according to the types of crimes hypothesis is not rejected. H3: The convicts have lower levels of financial sophistication then other disadvantages groups hypothesis is rejected. Our financial literacy indices indicated that the prisoners’ basic financial literacy levels were closely related to various demographic factors whereas the level of financial sophistication was weakly related to them. Individuals imprisoned for grievous bodily harm and murder had the highest financial literacy levels, and were similar to levels in the general Public. Regarding sophisticated literacy, all respondents had high literacy levels for asset pricing, risk diversification, fees and deductions, and concepts.

Keywords

• Crime
• Prison
• Financial Literacy
• Financial Sophistication
• Criminology

References

1. Abubakar, H. A. (2015). Entrepreneurship development and financial literacy in Africa. World Journal of Entrepreneurship, Management and Sustainable Development, 11(4), 281-294. DOI 10.1108/ WJEMSD-04-2015-0020 google scholar
2. Agarwalla, S. K., Barau, S. K., Jacob, J., & Varma, J. R. (2014). Effectiveness of financial literacy interventions in improving financial literacy among rural women in North India. Ahmedabad: Indian Institute of Management. google scholar
3. Ahangar, R. G., & Rooshan, A. A. (2010). Emotional intelligence as determinant/predictor of work performance among. 2010 International Conference on Financial Theory and Engineering, (pp. 147-150). google scholar
4. Allgood, S., & Walstad, W. B. (2016). The effects of perceived and actual financial literacy on. Economic Inquiry, 54(1), 675-697. google scholar
5. Al-Tamimi, H. A., & Kalli, A. B. (2009). Financial literacy and investment decisions of UAE investors. The Journal of Risk Finance, 10(5), 500-516. DOI 10.1108/15265940911001402 google scholar
6. Altıntaş, K. M. (2011). The dynamics of financial literacy within the framework of personal finance: An analysis among Turkish university students. African Journal of Business Management, 5(26), 10483-10491. google scholar
7. Assefa, M., & P.V., D. R. (2018). Financial Literacy and Investment Behaviour of Salaried Individuals: A Case Study of Wolaita Sodo Town. International Journal of Business and Management Invention, 7(1), 43-50. google scholar
8. Baglioni, A., Colombo, L., & Piccirilli, G. (2017). On the Anatomy of Financial Literacy in Italy. Economic Notes; Review of Banking, Finance and Monetary Economics, 47(2), 245-303. doi: https://doi.org/10.1111/ ecno.12111 google scholar

9. Basu, R. (2020). Financial Sophistication and Private Long-term Care. Journal of Health Care Finance, Special Features (No Subscription Required), 1-16. google scholar
10. Call, L. L., Dyer, J. W., Wiley, A. R., & Day, R. D. (2013). Inmate Perceptions of Financial Education Needs: Suggestions for Financial Educators. Journal of Financial Counselling and Planning, 24(1), 45-60. google scholar
11. Calvet, L. E., Campbell, J. Y., & Sodini, P. (2009). Measuring the financial sophistication of Household. Working Paper Series, National Bureau of Economic Research. google scholar
12. Campbell, J. Y. (2006). Household Finance. Journal of Finance, 61, 1553-1604. google scholar
13. Carison, P. M. (2015). Prison and Jail Administration: Practice and Theory. United States: Jhones&Bartlett Learning. google scholar
14. Carlander, A., & Hauff, J. C. (2019). Financial Literacy and Debt. In G. T. Hauff J., Indebtedness in Early Adulthood (pp. 129-149). Palgrave Macmillan, Cham. doi: https://doi.org/10.1007/978-3-030-13996-4_7 google scholar
15. Chen, H., & Volpe, R. P. (1998). “An Analysis of Personal Financial Literacy among. Financial Service Review, 7(2), 107-128. google scholar
16. Chu, Z., Wang, Z., Xiao, J. J., & Zhang, W. (2017). Financial literacy, portfolio choice and. Social Indicators Research, 12(2), 799-820. google scholar
17. Clear, T. R. (2007). Imprisoning communities: How mass incarceration makes disadvantaged neighbourhoods. New York: Oxford University Press. google scholar Cutler, N. E. (1997). The False Alarms and Blaring Sirens of Financial Literacy: Generations, 21(2), 34-40. google scholar
18. Ehrlich, I. (1975). On the Relation between Education and Crime. In F. E. Juster, Education, Income, and Human Behaviour (pp. 313-338). NBER. Retrieved from http://www.nber.org/books/just75-1 google scholar
19. Fletschner, D., & Mesbah, D. (2011). Gender disparity in access to information: Do spouses share what they know? World Development, 39(8), 1422-1433. doi: http://doi.org/10.1016/j. google scholar
20. Galchus, K. (2015). Why State and Federal Officials Should Consider Offering Financial Literacy Training to Those About to Be Released from Correctional Institutions. International Journal of Financial Research, 6(4), 60-67. doi:10.5430/ijfr.v6n4p60 google scholar
21. Galchus, K. E. (2014). The Case for Financial Literacy Training in Correctional Institutions. International Research Journal of Applied Science, V(6), 781-788. google scholar
22. Glidden, M. D., & Brown, T. C. (2016). Separated by Bars or Dollar Signs? A Comparative Examination of the Financial Literacy of Those Incarcerated and the General Population. American Journal of Criminal Justice, 42, 533-553. DOI 10.1007/s12103-016-9377-z google scholar
23. Glidden, M. D., Brown, T. C., Smith, M., & Hughes, M. H. (2018). Prisoners with Purses: The Financial Literacy and Habits of Incarcerated Women. Corrections. doi:10.1080/23774657.2018.1549966 google scholar
24. Groot, W., & van der Brink, H. M. (2010). The Effects of Education on Crime. Applied Economics, 42, 279-289. google scholar
25. Guerino, P., Harrison, P. M., & Sabol, W. J. (2011). Prisoners in 2010. U.S. Department of Justice, Office of Justice Programs, Bureau of Justice Statistics. Retrieved May 22, 2020, from https://www.bjs.gov/content/ pub/pdf/p10.pdf google scholar
26. Hilgert, M., Hogart , J., & Beverly, S. (2003). Household Financial Management: The Connection between Knowledge and Behaviour. Federal Reserve Bulletin, 309-332. google scholar
27. Hilgert, M., Hogart , J., & Beverly, S. (2003). Household financial management: The connection between knowledge and behaviour. Federal Reserve Bulletin, 309-332. google scholar
28. Hogarth, J. M., & Hilgert, M. (2002). Financial knowledge, experience and learning preferences: Consumer Interest Annual, 48, 1-7. google scholar
29. Huston, S. J. (2012). Financial Literacy and the Cost of Borrowing. International Journal of Consumer Studies, 36, 566-572. doi: 10.1111/j.1470-6431.2012.01122.x google scholar
30. Huston, S. J., Finke, M. S., & Smith, H. (2012). A financial sophistication proxy for the Survey of Consumer Finances. Applied Economics Letters, 19(13), 1275-1278. doi: https://doi.org/10.1080/13504851.2011.619 485 google scholar
31. Irish, J. F. (1989). Probation and recidivism: A study of probation adjustment and its relationship to post probation outcome for adult criminal offenders in Nassau County, New York. Mineola, NY: Nassau County Probation Department. google scholar
32. Janor, H., Yakob, R., Hashim, N. A., Zanariah, Z., & Wel, C. A. (2016). Financial literacy and investment decisions in Malaysia and United Kingdom: A comparative analysis. GEOGRAFHIA Malaysian journal of Society and Space, 12(2), 106-118. google scholar
33. Japelli, T., & Padula, M. (2013). Investment in financial literacy and saving decisions. Journal of Banking and Finance, 37(8), 2779-2792. doi:10.1016/j.jbankfin.2013.03.019 google scholar
34. Johnson, E., & Sherraden, M. S. (2007). From Financial Literacy to Financial Capability Among Youth. Journal of Sociology and Social Welfare, XXXIV. google scholar
35. Kadoya, Y., Khan, M. R., Hamada, T., & Dominguez, A. (2018). Financial Literacy and Anxiety about Life in Old Age: Evidence from the USA. Review of Economics of the House Hold, 16, 859-878. doi: https://doi. org/10.1007/s11150-017-9401-1 google scholar
36. Karaa, İ. E., & Kuğu, T. D. (2016). Determining Advanced and Basic Financial Literacy. EDUCATIONAL SCIENCES: THEORY & PRACTICE, 16(6), 1865-1891. doi:10.12738/estp.2016.6.0415 google scholar
37. Kefela, G. T. (2010). Promoting Access to Finance by Empowering Consumers-Financial Literacy in Developing Countries. Educational Research and Reviews, 5(5), 205-212. google scholar
38. Klapper, L., Lusardi, A., & Panos, G. A. (2013). Financial literacy and its consequences: Evidence from Russia during the financial crisis. Journal of Banking & Finance, 37, 3904-923. DOI: http://dx.doi.org/10.1016/j. jbankfin.2013.07.014 google scholar
39. Kodongo, O. (2018). Financial Regulations, Financial Literacy, and Financial Inclusion: Insights from Kenya. Emerging Markets Finance and Trade, 54(12), 2851-2873. DOI: 10.1080/1540496X.2017.1418318 google scholar
40. Koenig, L. A. (2007). Financial literacy curriculum: The effect on offender money management skills. journal of Correctional Education, 58, 43-56. google scholar
41. Kyrychenko, V., & Shum, P. (2009). Who holds foreign stocks and bonds? Characteristics of active investors in foreign securities. Financial Services Review, 18, 1-21. google scholar
42. Laurent, E. C., Campbell, J. Y., & Sodini, P. (2009). Measuring the Financial Sophistication of Households. The American Economic Review, 99(2), 393-398. DOI: 10.1257/aer.99.2.393 google scholar
43. Lochner, L. (2004). Education, work, and crime: A human capital approach. International Economic Review, 811-843. google scholar
44. Lochner, L. (2011). Chapter 2 - Non-productive Benefits of Education: Crime, Health, and Good Citizenship. In E. A. Hanushek, S. Marchin, & L. Woessmann, Handbook of The Economics of Education (pp. 183-282). Elsevier. doi: https://doi.org/10.1016/B978-0-444-53444-6.00002-X google scholar
45. Lochner, L., & Moretti, E. (2004). The effect of education on crime: Evidence from prison inmates, arrest and self reports. American Economic Review, 155-189. google scholar
46. Lusardi, A. (2011). Americans’ Financial Capability. Massachusetts: the National Bureau of Economic Research. Retrieved may 31, 2020, from http://www.nber.org/papers/w17103 google scholar
47. Lusardi, A. (2015). Financial literacy: Do people know the ABCs of finance? Public Understanding of Science, 24(3), 260-271. https://doi.org/10.1177/0963662514564516 google scholar
48. Lusardi, A., & Mitchell, O. S. (2007). Baby Boomer retirement security: The roles of. Journal of Monetary Economics, 54, 205-224. DOI: 10.1016/j.jmoneco.2006.12.001 google scholar
49. Lusardi, A., & Scheresberg, C. B. (2013). Financial Literacy and High-Cost Borrowing in the United States. the National Bureau of Economic Research. Retrieved 6 16, 2020, from https://www.nber.org/papers/w18969 google scholar
50. Lusardi, A., Michauld, C., & Mitchell, O. S. (2017). Optimal Financial Knowledge and Wealth Inequality. Journal of Political Economy, 127(2), 431-477. doi:10.1086/690950 google scholar
51. Lusardi, A., Mitchell, O. S., & Curto, V. (2014). Financial Literacy and Financial Sophistication in the Older Population. J Pension Econ Financ., 13(4), 347-366. doi:10.1017/S1474747214000031. google scholar
52. Lusardir, A. (2008). Financial literacy: An essential tool for informed consumer choice? Nber Working Paper Series Financial, 1(Working Paper 14084),. doi: http://doi.org/10.3386/w14084 google scholar
53. Lyons, A. C., & Kass-Hanna, J. (2018). Financial Inclusion, Financial Literacy and Economically Vulnerable Populations in the Middle East and North Africa. Emerging Markets Finance and Trade. doi:10.1080/1540 496X.2019.1598370 google scholar
54. Mandel, L., & Klein, L. S. (2007). Motivation and Financial Literacy. Financial Service Review, 16(2), 105-116. google scholar
55. Marbey, A. F., & Ferguson, R. (2005). Responding to prisoner re-entry, recidivism, and incarceration. Journal of Black Studies, 35(5), 633-649. doi:10.1177/0021934704270254 google scholar
56. Martin, L. L. (2011). Debt to society: Asset poverty and prisoner re-entry. Review of Black Political Economy, 38(2), 131-143. doi:10.1007/s12114-011-9087-1 google scholar
57. Mason, C. J., & Wilson, R. S. (2000). Conceptualising Financial Literacy. Loughborough University Business School. google scholar
58. Mielitz, K. S., Clady, J., Lurtz, M., & Archuleta, K. (2019). Barriers to Banking: A Mixed-Methods, Investigation of Previously Incarcerated Individuals’ Banking Perception and Financial Knowledge. The Journal of Consumer Affairs, 1748-1774. DOI: 10.1111/joca.12260 google scholar
59. Mielitz, K. S., MacDonald, M., & Lurtz, M. (2018). Financial Literacy Education in a Work Release Program for and Incarcerated Sample. Journal of Financial Counselling and Planning, 29(2), 316-327. doi: http:// dx. doi. org/ 10. 1891/ 1052- 3073. 29. 2. 316 google scholar
60. Mielitz, K., & Marcum, C. (2020). A consideration for Increasing Post Release Financial Success. Amirican Criminal Justice. doi:https://doi.org/10.1007/s12103-019-09515-2 google scholar
61. Miellitz, K. S., & MacDonald, M. (2016). Americans’ Confidence in Banks Still Languishing Below 30%. Retrieved from https://news.gallup.com/poll/192719/americans-confidence-banks-languishing-below.aspx google scholar
62. Miwako, N., Riding, A., & Orser, B. (2019). Self-employment, gender, financial knowledge, and high-cost borrowing. Journal of Small Business Management. doi:10.1080/00472778.2019.1659685 google scholar
63. Monticone, C. (2010). How much does wealth matter in the acquisition of financial literacy? The Journal of Consumer Affairs,, 44(2), 403-422. google scholar
64. Moore, D. (2003). Survey of Financial Literacy in Washington State: Knowledge, Behaviour, Attitudes, and Experiences” (Technical Report n. 03-39). Washington state University: Social and Economic Sciences Research Centre. google scholar
65. Mouna, A., & Anis, J. (2017). Financial literacy in Tunisia: Its determinants and its implications on investment behaviour. Research in International Business and Finance, 39(A), 568-577. doi:https://doi.org/10.1016/j. ribaf.2016.09.018 google scholar
66. Murphy, J., Gourd, A., & Begay, F. (2014). Financial Literacy Among American Indians and Alaska Natives. Research and Statistics Note, , 2014-4. google scholar
67. Nicolini, G. (2019). Financial Literacy in Europe: Assessment Methodologies and Evidence From European Countries. NY: Routledge International Studies in Money and Banking. google scholar
68. Niu, G., Zhou, Y., & Gan, H. (2020). Financial literacy and retirement preparation in China. Pacific-Basin Finance Journal, 59, 1-17. doi: https://doi.org/10.1016/j.pacfin.2020.101262 google scholar
69. OECD. (2005). Improving Financial Literacy: Analysis of Issues and Policies. Paris: OECD. google scholar
70. OECD. (2016). OECD/INFE International Survey of Adult Financial Literacy Competencies. Paris: OECD. Retrieved from www.oecd.org/finance/OECD-INFE-International-Survey-of-Adult-Financial-Literacy-Competencies.pdf google scholar
71. Potrich, A. G., Vieira, K. M., & Kirch, G. (2015). Determinants of Financial Literacy: Analysis of the Influence of Socioeconomic and Demographic Variables. Revista Contabilidade & Finanças-USP Sau Paulo, 26(69), 362-377. google scholar
72. Potrich, A. G., Vieira, K. M., & Kirch, G. (2018). How well do women do when it comes to financial literacy? Proposition of an indicator and analysis of gender differences. Journal of Behavioural and Experimental Finance, 17, 28-41. doi: https://doi.org/10.1016/j.jbef.2017.12.005 google scholar
73. Sabol, W. J., & Lynch, J. P. (2003). Assessing the longer-run consequences of incarceration: Effects on families and employment. Contributions in Criminology and Penology, 55, 3-26. google scholar
74. Sevim, N., Temizel, F., & Sayılır, Ö. (2012). The effects of financial literacy on the borrowing behaviour of Turkish financial consumers. International Journal of Consumer Studies, 36, 573-579. doi: 10.1111/j.1470-6431.2012.01123.x google scholar
75. Sohn, S.-H., Joo, S.-H., Grable, J. E., Lee, S., & Kim, M. (2012). Adolescents’ financial literacy: The role of financial socialization agents, financial experiences, and money attitudes in shaping financial literacy among South Korean youth. Journal of Adolescence, 35, 969-980. doi: https://doi.org/10.1016/j.adolescence.2012.02.002 google scholar
76. Solomon, G. E., Nhete, T., & Sithole, B. M. (2018). The Case for the Need for Personal Financial Literacy Education in Botswana Secondary Schools. SAGE Open, 1-9. doi:DOI: 10.1177/2158244017753867 google scholar
77. Stolper, O. A., & Walter, A. (2017). Financial Literacy, Financial Advice and Financial Behaviour. Journal of Business Economics, 87, 581-643. doi: https://doi.org/10.1007/s11573-017-0853-9 google scholar
78. Thapa, B. S., & Nepal, S. R. (2015). Financial Literacy in Nepal: A survey analysis from college students. NBR Economic Review, 27(1), 49-74. google scholar
79. TurkStat. (2020). Prison population as of 31st December, 1998-2018. Retrieved from http://www.tuik.gov.tr/ UstMenu.do?metod=temelist google scholar
80. Uzuner, A. T., & Geyikçi, U. B. (2021). Selection Criteria For Prison Locations: Key Study of Turkey. Journal of Multi Criteria Decision Analysis. Vol. 28, pp.99-111, doi:10.1002/mcda.1735 google scholar
81. van Rooij, M., Lusardi, A., & Alessie, R. (2011). Financial literacy and stock market participation. Journal of Financial Economics, 101, 449-472. DOI: 0.1016/j.jfineco.2011.03.006 google scholar
82. van Rooji, M. (2009). Financial Literacy, Retirement Planning, and Household Portfolio Behaviour: Four Empirical Contributions. Utrecht: Utrecht University. google scholar
83. Veselak, K. M. (2015). The Relationship between Education Attainment and the Type of Crime Committed by Incarcerated Offenders. The Journal of Correctional Education, 66(2), 30-56. google scholar