Digitalization and decarbonization are two drivers of profound economic and social transformation. The study evaluates to what extent the financial literacy of micro-entrepreneurs can support the transition process of their firms, which lag behind compared with larger enterprises. For this purpose, data from a financial literacy survey conducted by the Bank of Italy in 2021 on approximately 2,000 entrepreneurs of non-financial enterprises with fewer than ten employees are used.
The financial literacy of micro-entrepreneurs, measured by a composite indicator of basic economic and financial knowledge and financial behaviours, promotes the transition of small businesses towards more digital and ecological business models. Specifically, an increase of one standard deviation in the financial literacy indicator increases the propensity to adopt digital and sustainable solutions by 44 and 40 per cent respectively, on average.
