Title: Measurement and aggregation sensitivity of OECD/INFE financial literacy scores across countries
Authors: Laivi Laidroo (Majandusanalüüsi ja rahanduse instituut, TalTech), Pia Rosenthal (Majandusanalüüsi ja rahanduse instituut, TalTech), Tõnn Talpsepp (Majandusanalüüsi ja rahanduse instituut, TalTech)

Abstract:

In the OECD/INFE International Survey of Adult Financial Literacy, financial literacy is measured as the sum of knowledge, attitude and behaviour scores. This paper assesses the robustness of OECD/INFE financial literacy country scores to the measurement and aggregation choices embedded in their construction, and identifies which choices most affect country positions. It examines five channels of distortion through three research questions on measurement quality, score construction, and compensatory aggregation, using rank shifts as a common metric. Drawing on data from 29 countries using the 2022/23 instrument, the analysis finds that the resulting country rankings are moderately robust. The broad ordering of countries is preserved after corrections, but many countries with uneven component profiles occupy positions that depend on the choices tested. Compensatory aggregation, whereby strength on one component offsets weakness on another, is the largest source of distortion. These findings point to several ways the instrument can be used more effectively: reporting a standardised financial literacy and its component scores alongside the summed score, publishing confidence intervals where neighbouring countries are statistically indistinguishable, and addressing cross-country differences in item functioning in future revisions.

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