What Do Ctzens Know about statstcs? The results of an OECD/ ISAE survey on Italan Consumers F. Fullone (*) M.Gamba (**) E. Govannn (**) M. Malgarn (*) May 2007 (*) ISTITUTO DI STUDI E ANALISI ECONOMICA Pazza dell' Indpendenza, 4 00185 ROMA (Italy) (**) ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT 2 Rue André-Pascal 75016- Pars (France) 1
1. Introducton The mportance of statstcal nformaton for democratc processes has been underlned by publc choce models. The recent lterature on the relatonshps between publc opnon, poltcal choces and the functonng of modern democraces argues that there are bg dfferences n what the general publc and specalsts, such as economsts, thnk about key ssues. Increasng attenton s gven to publc opnon, even when t s poorly nformed. Blnder and Krueger (2004) presented some evdence about what U.S. ctzens actually know about key economc facts. They found that a sgnfcant number of Amercans do not know very much about the country s economc stuaton. They also tested a range of factors that mght explan how people s belefs are shaped. They found that deology was the most mportant determnant n shapng the publc s opnon, selfnterest was the least mportant, and economc knowledge was n between. Therefore, ther fndngs seem consstent wth an dea from poltcal scence: people often use deology as a short cut for decdng what poston to take, especally when properly nformng oneself s dffcult. They conclude that there s room for hope that greater knowledge wll mprove decson makng, even though t appears from our survey that efforts n ths drecton have shown less than mpressve results to date. Recent work relates more drectly to statstcs and ther dssemnaton. Carroll (2003) tests a model of how emprcal expectatons are formed. Hs approach takes the news as the key provder of nformaton on macroeconomc varables. He adds to ths, frstly, the dea that people do not update ther expectatons and personal forecasts contnuously but probablstcally. In addton, he looks at the role professonal forecasters play n nformng the meda. Emprcal work by Doms and Morn (2004) supplements Carroll s (2003) analyss. These authors elaborate the role of the meda. Partcularly, they establsh three mportant ways through whch the meda affects the publc s vews on the state of the economy: () by conveyng economc data and expert opnons; () by sendng a sgnal based on the tone of the economc report; and () by the volume of reportng, whch nfluences the lkelhood of people updatng ther expectatons (ths adds to the sgnal value of the amount of reportng). Followng the Blnder and Kruger s example, the OECD has promoted the frst co-ordnated nternatonal survey on what ctzens know about key economc statstcs. The full results of the survey (carred out, n Aprl 2007, n 29 European countres - by Eurobarometer - and US by the Unversty of Mchgan) wll be presented durng the OECD World Forum. Ths paper presents the results obtaned for Italy through a survey carred out by ISAE n March- Aprl 2997 on Italan ctzens. In partcular, secton 2 ntroduces the OECD project on Measurng the progress of socetes, presentng the companon surveys performed by Eurobarometer and the Unversty of Mchgan on the ssues dealt wth n ths paper. Secton 3 ntroduces the ISAE survey on Italan consumers and the questonnare used for the OECD/ ISAE survey on statstcal knowledge. Secton 4 presents the results obtaned at an aggregate level and secton 5 ntroduces an econometrc model of knowledge, n whch an aggregate measure of statstcal knowledge approprately derved from survey results s regressed on soco-demographc characterstcs of the respondents, the desre and wllngness of beng nformed and the sources of nformaton used. Some consderatons on the results obtaned conclude the paper. 2. The OECD Project on Measurng the Progress of Socetes As cted n Govannn (2006), ntatves to measure progress at the nternatonal, natonal and local levels are prolferatng all over the world n response to a growng demand for more meanngful measures of economc, socal and envronmental change and for more accountablty of publc polces and poltcans. Meetngs organsed n every contnent n preparaton of the second World Forum, wth more than 100 countres, as well as the enthusasm demonstrated for ths ntatve by organsatons and ndvduals workng around the world n the publc, prvate and ctzen sectors, show that there s a concrete demand for a global communty of practce for those wantng to measure progress. The Project wll acheve ts msson through advocatng the mportance of ths work, mprovng the state of the art on the measurement and dssemnaton of progress measures and assstng countres to undertake ths work. There are four key goals: 2
Foster a global conversaton about what progress actually means. In order to measure and acheve progress, people need to know what progress looks lke. There can be no sngle answer, but by brngng together dfferent communtes, cultures and nterest groups the project wll debate and recognse dfferng vews and fnd common ground. Such a dscusson wll beneft anyone seekng to measure progress at the sub-natonal or natonal level, but t wll be mportant at the global level too. Galvanse people and nsttutons to acton. By brngng together an engaged global communty of practce, the Project wll facltate the collaboraton of dverse groups and the sharng of success stores about the development and use of progress ndcators, thereby fosterng the development of evdence-based publc choce and a facts-based cvc dalogue, mprovng the democratc functonng of modern socetes. Improve the effectveness of ndcator work and ther use for polcy makng. By sharng best practces among those workng on ndcator ntatves, and strengthenng nternatonal comparsons, the Project wll mprove the ways n whch ndcator sets are developed, dssemnated and, most mportantly, used. In addton to a techncal dscusson about ndcators, an mportant element of the project wll be to foster the debate on the ways n whch polces can be mproved through the use of ndcators. Make a key contrbuton to the nternatonal dscusson n the run up to 2015 when the set of exstng Mllennum Development Goals and Indcators (manly desgned for developng countres) wll be revewed. The project wll ntegrate the current top-down approach to the development of nternatonal ndcators wth a bottom-up effort, to take nto account cultural, socal and economc dfferences around the world. To acheve ts goals, the Global Project wll carry out actvtes n the followng areas: Carry out statstcal research on the measurement of socetal progress n all ts dmensons; Desgn, develop and promote the use of nnovatve ICT tools to facltate the transformaton of statstcs nto knowledge; Establsh a global network to foster the measurement of progress n each and every country; Develop a global nfrastructure to facltate the assessment of socetal progress at natonal and global levels to brng about evdence-based polcy dscussons and decson-makng. More nformaton about the Project s made avalable to Forum partcpants. In ths context, the Project advocates the organzaton of an nternatonal survey on what the general populaton knows about key economc, socal and envronmental phenomena n ther countres. 3. The ISAE consumers opnon survey: a methodologcal ntroducton In the framework of an EU project harmonzed by the European Commsson 1, ISAE has been conductng snce 1973 a monthly survey on consumers opnon. The survey conssts of qualtatve questons on the economc and personal stuaton of consumers. Questons generally allow fve possble answers, rangng from strongly postve to strongly negatve; results are usually expressed as weghted balances of postve and negatve reples, assgnng double weght to extreme (postve and negatve) answers. The survey s carred out va telephone and combned wth Computer Asssted Telephone Intervewng (CATI) System; t s based on a monthly sample of 2, 000 Italan consumers, changng each month, for a total of 24, 000 persons ntervewed per year. The sample s extracted from the publc telephone 1 For the complete questonnare, see the DG Ecfn webste at: http://europe.eu.nt/economy_fnance/ndcators/busness_consumers_surveys/usergude _en.pdf. See also Malgarn and Margan (2007), for a descrpton of the ISAE survey. 3
book regsters and selected on the bass of a two-stage technque: n the frst step, t s stratfed accordng to the zone of resdence and the sze of muncpaltes (see table 1); the second step s based on the selecton of a specfc consumer wthn the household selected n the frst step. Ths selecton s based on quota samplng accordng to gender (48.5% males, 51.5% females) 2. Table 1: The ISAE sample Geographc zone Less than 5, 000 5, 000-10, 000 10,001-20,000 Sze of muncpaltes 20,001-50,000 50,001-100,000 100,001-500,000 More than 500,000 North West 57 23 22 35 19 4 53 213 Centre-North 76 59 53 53 25 15 45 326 North-East 70 73 76 46 28 90 0 383 Centre 44 41 51 76 49 42 88 391 South 78 59 76 97 82 41 32 465 Islands 35 29 28 51 25 32 22 222 Total 360 284 306 358 228 224 240 2, 000 Total For the aggregaton of ndvdual reples, ISAE has recently proposed a double-weghtng system based on probablty and post-stratfcaton weghts (see Fullone and Martell, 2006). More specfcally, probablty weghts are the nverse of the selecton probablty; they are used to correct for possble selecton bas dervng from unequal selecton probabltes, lnked to the nature of the lst of reference and the sze of the famly selected. On the other hand, post stratfcaton weghts am to correct for possble representatveness problems dervng, for nstance, from the fact that unemployed and retred people are easer to contact than employee or self-employed. To correct for ths knd of bas, ISAE uses an ex-post calbraton method based on auxlary nformaton derved from offcal structural populaton statstcs: more specfcally, we make use of auxlary nformaton about sze of muncpalty, geographc regon, educaton, type of occupaton and age of the respondents. 4. The OECD/ISAE survey on statstcal knowledge In March and Aprl 2007 surveys ISAE n collaboraton wth the Statstcs Drectorate of OECD, has added a number of questons on the knowledge of some key statstcal and demographc fgures, together wth three questons that am to measure respectvely, the wllngness/desre to be nformed about statstcal ssues and the meda tools that are used to obtan such nformaton. 4.1 The Questonnare The March questonnare focussed on the knowledge of offcal fgures for key economc varables such as GDP growth, nflaton, unemployment rate, defct to GDP rato, and the Euro/ Dollar exchange rate. The Aprl questonnare, whle repeatng the questons on GDP growth, Inflaton rate, wllngness and the meda used to acqure nformaton, engaged on the knowledge of key demographc varables such as the sze of Italan populaton and lfe expectancy at brth. Some other questons on structural aspects of the economy (concernng respectvely ar polluton, students lteracy and R&D expendture) were also added to the Aprl questonnare 3. Questons on economc fgures were generally quanttatve,.e. we smply asked about the knowledge on the most recent publshed value of a gven varable, as for the GDP queston reported below: ISTAT has recently publshed the offcal fgures for Italan GDP growth n 2006. Can you tell us the rate of growth of Italan GDP n 2006? 2 Wth quota samplng, response rates are always equal to 100%: non responses lead to replacement n the sample untl the quota s acheved. In the case of the ISAE survey, n order to acheve the goal of 24, 000 ntervews each year a total of 120, 000 consumers are extracted from the telephone regsters accordng to the stratfcaton outlned above. 4
In the case of the Euro/ Dollar exchange rate we preferred to ask a qualtatve queston structured on a Lkert scale about the ncrease/ decrease of the exchange rate: One year ago 1 Euro was worth 1.20 US Dollars. In other words, wth 1 Euro t was possble to buy 1.20 Dollars. Can you tell us f the Euro s now worth more or less than 1.20 dollars; n other words, do you thnk that now wth 1 Euro you can buy more, an equal amount or less than 1.20 Dollars? Questons on demographcs ssues, whch are quanttatve as those on GDP and respondents were asked to choose among dfferent possble answers, each ndcatng a possble nterval of values. For example: Lfe expectancy at brth s an mportant ndcator of the welfare of a country; accordng to offcal statstcs, can you tell us how many years a person born today n Italy may expect to lve? Please tck one of the followng optons: - Less than 60 years - Between 60 and 65 years - Between 66 and 70 years - Between 71 and 75 years - Between 76 and 80 years - Between 81 and 85 years - Between 86 and 90 years - More than 90 years - Don t Know - Refuse to answer In both the March and Aprl s questonnares, two sets of questons ntended to measure, respectvely, the mportance attrbuted to economc nformaton (from extremely mportant to not mportant ), the desre to be nformed (yes/ no) and the man channels used to acqure nformaton (possble answers beng TV; newspapers; nternet; rado; frends and relatves; poltcal and cvc leaders) were added to the exstng lst. 4.2 Partcpaton rates and aggregate results: quanttatve questons Questons have been proposed alternatvely n March and Aprl, wth only those on GDP, nflaton and on the desred to be nformed/meda repeated for both the questonnares. In order to reach a better assessment on the qualty of the survey, for each queston, respondents refusng to answer were dstngushed from those answerng I don t know to the gven queston. Table 2 reports the man results for the quanttatve questons; response rates are on average qute low, as t s common n ths knd of surveys (see Blnder and Krueger, 2004); t s nterestng to note that on average around 30% of the respondents referrers to questons on nflaton and on the unemployment rate, whereas only a 13.8 to the defct to GDP rato. However, most of the people refusng to answer are clamng that they are not capable of reportng an approprate value, that s to say that they refuse to answer smply because they do not know the answer to that specfc queston. Knowledge about the phenomena of nterest After havng weghted the results so to consder possble selecton bas and representatve problems, Italan consumers tend to be slghtly over-optmstc when reportng about the GDP growth rate and over pessmstc for nflaton and, especally, for the unemployment rate and the defct to GDP rato: a 3.8% average rate s reported for nflaton (as opposed to the 1.8-1.7 % offcal fgures for March/ Aprl 2007), whereas an over-estmated 14.5% (offcal fgure 6.8%) and an 8.5% (offcal fgure 4.4%) are the reported fgures for unemployment and defct to GDP rato. The overall answers are strongly skewed to the rght; n such cases, the sample mean s not an accurate estmator of populaton results, as t s confrmed by the fact that the mean s always greater than the medan of the dstrbuton. In ths sense, the medan may be consdered as a more accurate estmator of sample results: ndeed, Italan consumers are shown to have an accurate medan knowledge of offcal GDP data snce the medan s equal to 2 (1.9) n March (Aprl); also 5
medan nflaton assessments result to be farly accurate- Italan consumers report a medan of 2.2 nflaton rate, only slghtly overestmatng the true value. Table 2- Statstcal Knowledge - Quanttatve questons Defct/ GDP Inflaton Unempl GDP March Aprl Average March Aprl Average March March Response rate (%) 27 19.2 23.1 32.6 23.6 28.1 32.1 12.7 Don't know (%) 70.5 72.8 71.7 65.1 68.8 66.9 65.4 84.5 Refuse to answer (%) 2.5 8 5.2 2.3 7.6 5 2.5 2.8 Average 2.7 2.1 2.5 4.5 2.9 3.8 14.5 8.5 Medan 2 1.9 2 2.4 2.1 2.2 10 3.4 P25 1.5 1.3 1.5 2 1.9 2 7 2 P75 2.4 2.2 2.2 3 3 3 16 4.4 Std. Dev. 3.7 1.8 3.1 8.7 2.9 6.9 13 14.5 True value 1.9* 1.9* 1.8** 1.7*** 6.8**** 4.4* (*) 2006, (**) February, (***) March, (****) III Quarter 2006, seasonally adjusted. Overestmaton s much more severe for unemployment, where the medan unemployment rate s equal to 10% whereas the true value s 6.8%: a possble nterpretaton for ths s that people are stll not fully aware that unemployment n Italy s now well below the probably psychologcally mportant 10% threshold, and t has been lke ths snce 2001, after almost 10 years of double-dgt unemployment fgures (.e., the 1992-1993 recesson). On the other hand the medan consumers underestmate the offcal fgures for the Maastrcht parameter accountng for the state of publc fnances n Italy n 2006. In ths case, t s possble that the underestmaton s lnked to the fact that besdes the 4.4 fgure for 2006, ISTAT has also dssemnated a lower fgure for the same varable 2.4 corrected for out of the ordnary expendtures. Fgure 1 Box plot dstrbuton GDP growth, Inflaton, Defct to GDP rato, Unemployment 0 20 40 60 80 GDP Inflaton defct to GDP rato Unemployment Across all four subjects, the geographcal dstrbuton of the respondents s qute homogeneous, whle a clear gender gap emerges: male response rates s always at least double than female (40% versus 20%), wth the excepton of the queston about defct/gdp, where female responses drop to 6% (male 21%). People aged 30-64 repled two tmes more than the older part of the sample. A clear dfference emerges wth respect to the degree of educaton: those who hold a unversty degree have a response rate three tmes hgher than those wth a prmary educaton (four tmes for the queston on the defct/gdp rato). 6
Income level also affects response rates. Those who earn more than 3,000 euros have a response rate for GDP and defct/gdp three tmes hgher than those who earn leas than 1,500 euros per month, but smaller dfferences appear for questons about nflaton and unemployment. Those who are self-employed present the hghest response rates, up to twce hgher than those of people unemployed or out of the labour force. Soco-economc condtons also affect the precson of answers. For example, t s nterestng to note that females ndcate hgher GDP growth (2.9) than males (2.6), nflaton (5.9 and 3.7 respectvely), unemployment (18 vs. 12.2) and defct/gdp rato (10.9 vs. 7.1). Females also present hgher standard devatons for all varables. Uncertanty More generally, both standard devaton and the nterquartle dfference (.e. the dfference between the 25th and 75th percentle of the dstrbuton answers, often nterpreted as a proxy to the varance of the dstrbuton) ndcate that Italan consumers are hghly hestant about the offcal fgures on the defct to GDP rato and the unemployment rate; dsperson around the mean s much lower for the knowledge on GDP growth and nflaton. As a confrmaton of the hypothess of learnng outlned above, the standard devaton s fallng steadly between Aprl and March for GDP growth (.e., one month after data dssemnaton), possbly also n relaton to the observed declne n the response rate. In other words, t s possble that two opposte forces are takng place here: learnng may ensure for nstance thru meda dscussons on the data a more accurate knowledge after some tme that the data are offcally avalable; on the other hand, for the less attentve ctzen, the tme elapsed from the moment the data have reached the headlnes mples a I don t know reply rather than an naccurate evaluaton on the phenomena of nterest. 4.3 Partcpaton rates and aggregate results: other quanttatve and qualtatve questons As expected, partcpaton rates are much hgher when we consder other quanttatve questons (.e. those n whch the respondents have to choose among dfferent alternatves) and some qualtatve questons. Questons on lfe expectancy, Co2 emssons and students lteracy levels are the most successful n terms of response rates, wth those on populaton and R&D expendture recevng the lower level of answers. Also n ths case, the proporton of the sample that refused to answer s qute low, confrmng on average the qualty adequacy of the estmatons. Knowledge on the exchange rate and R&D expendture Concernng the more economc-orented questons those on the Euro/ Dollar exchange rate and the R&D expendture n Italy people show an adequate qualtatve knowledge of the underlyng phenomena (table 3): over 40% of the sample reports that the exchange rate s ncreased wth respect to the 1.20 fgure of twelve months before; smlarly, almost half of the sample (48.7%) correctly reports that R&D expendture of both the publc and prvate Italan sector s lower than the European average. However, almost a 20% of the Italan consumers report that the exchange rate s stable and a sgnfcant 13% state t s actually decreased wth respect to 12 months before. On the other hand, only a small proporton of the populaton (as low as 5%) beleves that Italan frms and the Government spend n R&D more than our European compettors, albet more than 17% of them thnk that expendtures are equal to the European averages. Knowledge on soco-demographc statstcs People s knowledge on demographc varables results to be qute unsatsfactory: only a very small proporton of the sample (as low as 4.5%) correctly reports that Italan populaton s between 58 and 59 mllons; more than 10% of Italan consumers (the mode of the dstrbuton) affrms that populaton s above 60 mllons, and another 9.2% estmates t n-between 59 and 60 mllons (wth smaller groups reportng possble values below the true one). On the other hand, almost 32% of Italan consumers correctly estmate lfe expectancy at brth rangng between 76 and 80 years (the mode of the dstrbuton), wth almost the same amount of people reportng values (well) below or above the true one. Concernng Co2 emssons, people correctly reports that emssons have ncreased n the last fve years; however they overestmate the mpact of such ncrease whch seems to be partcularly strong for over 61% of the respondents. Fnally, as for students lteracy (OECD, 2003), almost 40% of Italan consumers correctly perceve that they are under-qualfed wth respect to ther European counterpart. 7
However, 8% of the sample clams that students are much less qualfed and almost a 27% that they are equally qualfed. Table 3 Response rate on qualtatve questons Response rate Don't Know Refuse to answer Weghted Survey answers (true values n bold) Increased 40.1 Euro/ Dollar (%) 73.1 25.3 1.7 Stable 19.8 Decreased 13.2 Hgher 5.1 R&D Expendture (%) 71.4 26.6 2 Equal 17.7 Lower 48.6 Between 50ml and 58ml 39.5 Populaton (%) 63.4 34.5 2.1 Between 58ml and 59ml 4.5 More than 59ml 19.4 Less than 76 years 23.5 Lfe expectancy (%) 77.4 20.4 2.2 Between 76 and 80 years 31.6 CO2 emssons (%) 89.7 8.5 1.9 Lteracy (%) 78.5 19.5 2 More than 80 years 22.3 Increased a lot 61.5 Increased 16.4 Stable 8.7 Decreased 0.4 Decreased a lot 2.7 Much more qualfed 5 More qualfed 6.7 Equally qualfed 26.9 Less qualfed 31.8 Much less qualfed 8.1 4.4 How mportant s knowledge for Italan ctzens, and how does they know t? The last part of the questonnare, common to both March and Aprl surveys, concentrates on the desre of Italan consumers to be nformed, and on the man meda used to acqure such nformaton. Table 4a reports survey results for the desre and mportance of beng nformed: 46% of Italan consumers thnk that t s mportant to be nformed, but only 8% of them beleve that t s extremely mportant, a result much lower than that obtaned n an analogous survey for the Unted States 4 where almost 24% of the sample beleved that nformaton s extremely mportant. Moreover, more than 15% of the sample beleves that t s not mportant to be nformed, and over 40% of people are not nterested n beng more nformed on such ssues. Fnally, table 4b reports the meda used more often to acqure such nformaton; televson s by far the most frequently used channel of nformaton, mentoned by over 82% of Italan consumers. Newspapers and perodcals are mportant for almost the 52% of the populaton, followed by Internet (23.3%) that qute surprsngly precedes the rado (18.6%) as well as conversatons wth frends and relatves (11.2%) and poltcal leaders (7%). Also n ths case, the comparson wth the US data s remarkable, showng that Italan consumers pay comparatvely much less attenton to nformal nformaton channels such as poltcal and cvc leaders opnons (cted as mportant sources of nformaton by over 45% of the US sample) and dscussons wth frends and relatves (cted by over 35% of the sample n the US survey). On the other hand, televson strongly domnates all the other meda, also n comparson wth the US data, accordng to whch only the 61% of the sample use t regularly to acqure such nformaton. 4 See Blnder and Krueger, 2004. 8
Table 4a- Importance of knowledge and Table 4b- Informaton channels (%) desre to be nformed How mportant s to be nformed on the ssues we have dscussed so far? Average (%) Extremely mportant 8.21 Very mportant 24.43 Informaton channels % Important 46.05 Televson 82.05 Not very mportant 12.39 Rado 18.58 Not mportant 3.2 Newspapers, perodcals 51.94 Don't know 3.96 Internet 23.27 Refuse to answer 1.77 Poltcal, opnon leaders 6.99 Would you lke to be more Frends, relatves 11.19 nformed on these ssues? Don't know 2.35 Yes 54.84 Refuse to answer 1.8 No 40.44 Don t Know/ Refuse to Answer 4.72 5. An Econometrc model of knowledge Secton 4 has ntroduced a descrpton of survey results, provdng some frst nterestng nsghts of the quanttatve and qualtatve level of knowledge of Italan consumers about mportant soco-economc varables such as GDP, nflaton, the Italan populaton, lfe expectancy and so forth. Ths secton wll then move a step forward tryng to assess the determnants of people knowledge, assumng that ths s nfluenced by soco-demographc characterstcs of the respondents, ther desre to be nformed and the meda they use to acqure the relevant nformaton. However n order to derve and estmate such a model, a synthetc measure of knowledge based on the data prevously presented needs to be bult. 5.1 The Knowledge score Theory The ntuton behnd the constructon of our knowledge measure, named knowledge score after the work of Blnder and Krueger (2004), s that for each queston on knowledge a score s assgned to each respondent based on the accuracy of hs/ her answer. As a startng pont, we consder only the quanttatve questons lsted n the March survey, namely those on GDP growth rate, nflaton, the defct to GDP rato, the unemployment rate and the Euro/ Dollar exchange rate; we therefore lmt our sample to the 2, 000 people that answered to the March survey. The sample s further reduced by the amount of mssng values emergng for both questons. In lterature, there are dfferent methods to assgn a score to a populaton sample, based on the results acheved n some knd of test, such as ths survey on economc knowledge (Percentle Ranks, Standard Pont (z), Normalsed Standard Pont, T pont, Stanne Pont). Generally speakng, when the dstrbuton of the results s not normal or partcularly skewed, as t was the case for the knowledge questons, the Percentle Rank method s employed. 9
The Percentle Rank 5 s a smple method that results n an ordnal measure of survey answers. Frst of all, we calculate the absolute value of the ndvduals errors (.e., the dfference between the ndvdual answer and the offcal data), and then ndvdual errors are sorted calculatng a raw score. In the fnal step we calculate the percentle rank on the bass of the ordnal poston of the raw score, weghtng to correct for possble samplng bas 6 and assgnng a hgher rank the lowest the absolute value of the error. The resultng percentle rank gves an dea of the poston of a respondent n the sorted sample. For example, a respondent whch has a test result ( raw score ) better than 90% of the sample s sad to be at the 90 th percentle of dstrbuton answers. Implementng the knowledge score to the survey data The Knowledge Score s bult on March data, ncludng the quanttatve questons on GDP, Inflaton, Defct/ GDP rato and unemployment rate, together wth the qualtatve queston on the Euro/ Dollar exchange rate. As an example, let us consder the frst queston about GDP growth; the response rate s roughly equal to 25% and the sample reports a slght overestmaton of the true value. As a frst step, we compute the absolute value of the error and consder t as a raw score. Secondly, we assgn to each answer a percentle rank based on people s accuracy, gvng the lowest percentle rank score to the greater error (consequentally, the hghest percentle rank s assgned to the lowest error). We then derve the dstrbuton of percentle ranks. In the next step, we assgn a zero pont label to people not answerng that partcular queston. After repeatng the experment for the other questons comprsed n the March survey, we can fnally evaluate the aggregate Knowledge score as the average of the 4 dfferent scores calculated for each queston (Fg. 2). In ths case we fnd that there are 961 meanngful respondents n our sample, whch answered to at least one of the fve economc questons. The mean of the aggregate knowledge score dstrbuton s 35.6 and ts standard devaton s equal to 19.8. Fgure 2 - Dstrbuton of aggregated knowledge scores Kernel Densty Estmate supermposed GDP growth, Inflaton, Unemployment, GDP rato, Euro/Dollar March 2007-961 observatons Densty 0.005.01.015.02.025 0 20 40 60 80 100 ktqualw Kernel densty estmate Densty 5 The mathematcal formula for the percentle rank (PCTRank) s the followng: cfl + 0.5( f) PCTRank = *100 N cfl f where s the cumulatve frequency for all raw scores lower than the raw score of nterest, s the frequency of the score of nterest, and N s the number of examnees n the sample. See Crocker & Algna (1986). 6 In addton to the weghts descrbed n secton 3 above, at ths stage we also weght accordng to gender, gven the fact that response rates for the knowledge questons were hgher for men than for women. 10
5.2 The model and ts econometrc outcomes Once the approprate aggregate measure of statstcal knowledge s derved, we proceed studyng the determnants of knowledge accordng to the demographc characterstcs of the respondents and ther desre of beng nformed. More specfcally, the model s: K = f ( SD, D, S ) + u Where K s the knowledge score, SD are the soco-demographc characterstcs of the respondent, D s the desre of beng nformed and S s the source they use for beng nformed. The unobserved error term u s assumed to be uncorrelated wth the covarates; on the other hand we allow resduals to be heteroschedastc and we use robust methods n the OLS estmates. We consder as control varables nformaton extracted from the ISAE consumers surveys concernng gender (M/F), age (4 classes, from <30 years to 65+), zone of resdence (North West, North East, Centre and South), employment status (4 categores, employees and self-employed, unemployed and nactve people), level of educaton (3 classes, lower, ntermedate and Unversty level) and ncome (dvded nto quartles). Desre to be nformed and the channels used to acqure nformaton are measured on the bass of the answers provded to the survey questons. Table 5 reports the results obtaned usng OLS; a total of 961 observatons are avalable for estmaton. We normalze wth respect to male respondents, beng dependent workers, n the frst ncome quartle under 30 years of age, lvng n the North West of Italy, wth the lowest educaton and havng answered that nformaton s extremely mportant and that they do not want to be nformed more about these ssues. In ths sense the constant term may be nterpreted as the average knowledge score for ths very specfc sub-group of the sample, and the coeffcents of the varous dummes represent f sgnfcant the ncrease/ decrease n the knowledge score that may be assocated wth the possesson of the specfc characterstc that the dummy tself represents. OLS regressons are able to explan more than 26% of the total varablty of the knowledge score. Results are broadly n lne wth what t may be expected: knowledge of Italan consumers s sgnfcantly nfluenced by professonal category, age, gender, zone of resdence, educaton and personal ncome. It s much lower for women than for men and for Southern resdents, beng nstead hgher wth hgher educaton, for ndependent workers and nactve people (among whch there are the students) and for people between 30 and 65 years of age. We do not fnd on the other hand any sgnfcant nfluence of ncome: n fact, t s possble that people are not partcularly wllng to provde nformaton about ther ncome, as t s testfed by the relatvely hgh non response (24% n March 2007) to ths queston. (1) Table 5 OLS regressons for Economc Knowledge Score (K) K-Score Varables (GDP, Inflaton, Unemployment, Defct/GDP) March Survey Coeffcent Std. Dev t Constant term 29.94 3.37 8.88 *** Soco-demographc controls Professonal category (baselne: employed) Self employed 4.1 1.76 2.33 ** Unemployed 1 1.06 0.94 Out of labour force 1.35 0.38 3.54 *** Age (baselne: up to 30 years) 30-50 years 4.01 2.1 1.91 * 50-65 years 9.49 2.15 4.41 *** > 65 years 1.88 2.35 0.8 Gender (baselne: Male) Female -12.08 1.12 11-10.75 ***
Zone of resdence (baselne: North-West) North-East 0.01 1.62 0.01 Centre -0.94 1.6-0.59 South -5.7 1.46-3.91 *** Educaton (baselne: prmary school) Hgh School or less 5.05 1.27 3.99 *** Unversty degree 8.72 1.89 4.62 *** Income (baselne: 1 st quartle) Second Quartle -0.25 1.56-0.16 Thrd Quartle 0.7 1.57 0.44 Fourth Quartle 2.03 1.51 1.34 Importance and desre of beng nformed Importance of beng nformed (baselne: Extremely mportant) Very Important -1.8 1.99-0.9 Important -7.42 1.86-3.98 *** Not very mportant -11.45 2.47-4.64 *** Absolutely not mportant -19.29 4.15-4.65 *** Desre to be more nformed? (baselne: No) Yes 0.71 1.26 0.56 Informaton channels Televson 0.43 1.58 0.27 Rado 1.39 1.37 1.01 Newspapers 5.15 1.15 4.46 *** Internet 2.95 1.47 2 ** Poltcal, cvc leaders -2.08 1.73-1.2 Frends, relatves -0.19 1.74-0.11 Number of avalable observatons: 961 R 2 =0.26 Statstcally Sgnfcance: * = 10%, **+ 5%, ***= 1% People attrbutng lower mportance to beng nformed are also those scorng worst results, whlst the declared desre of beng nformed does not sgnfcantly nfluence the results. As for the man nformaton channels, a knowledge dvde runs between those that are currently readng newspapers and magaznes and those that are not, wth the former realzng a much hgher score than the latter; also the use of the Internet has a postve mpact on the knowledge of Italan ctzens. All the other channels do not sgnfcantly nfluence the results. 6. Conclusons Ths paper represents a frst attempt to evaluate to what extent Italan ctzens know offcal statstcs concernng key economc varables. The results ndcate a very lttle capacty of ndcatng, n quanttatve terms, growth rates or levels of varables very often quoted n the publc debate and frequently reported by meda. Better results are obtaned when people are asked to ndcate, n qualtatve terms, trends or levels of varous phenomena. Dfferences n people s knowledge largely depend on soco-economc condtons, as well as on cultural atttudes and the channels used to access nformaton. These results should be taken very serously by offcal statstcans, meda and polcy makers. Statstcans should rethnk about ther communcaton strateges, as well as the necessary nvestments to ncrease the statstcal culture of ctzens. Meda should also thnk about new ways to make ther communcaton on key economc fgures more effectve, especally vs-à-vs the more dsadvantaged groups. Fnally, polcy makers should thnk about new ways to foster cvc engagement and mprove people s understandng of the man challenges faced by the country, as well as of alternatve polcy proposals. 12
References Blnder A.S. and Krueger A.B. (2004), What does the people Know About Economc Polcy, and How Does It Know It?, NBER Workng Paper n. 10787, September. Carroll C.D. (2003). Macroeconomc expectatons of households and professonal forecasters, Quarterly Journal of Economcs, 118 (1), pp. 269-298. Crocker, L. and Algna, J. (1986), Introducton to classcal and modern test theory, Harcourt Brace College Publshers. Doms M. and N. Morn (2004), Consumer Sentment, the Economy, and the News Meda, FRBSF Workng Paper 2004-09, San Francsco: Federal Reserve Bank of San Francsco. Fullone, F. and Martell M. (2006), Re-Thnkng the ISAE Consumer Survey Processng, paper presented at the 28 th CIRET Conference, Rome, September. Govannn, E. (2006), Statstcs and Poltcs n a Knowledge Socety, OECD workng paper, Pars. Malgarn M. and Margan P. (2007), Psychology, Consumer Sentment and Household Expendtures: A Dsaggregated Analyss, forthcomng n Appled Economcs. OECD (2003), PISA Assessment Framework: Mathematcs, Readng, Scence and Problem Solvng Knowledge and Sklls, OECD Pars. 13