How Financial Literacy Affects Household Wealth Accumulation
Behrman, Jere R.,
Olivia S. Mitchell,
Cindy K. Soo, and
David Bravo. 2012. "How Financial Literacy Affects Household Wealth Accumulation."
American Economic Review,
This study isolates the causal effects of financial literacy and schooling on wealth accumulation using a new household dataset and an instrumental variables (IV) approach. Financial literacy and schooling attainment are both strongly positively associated with wealth outcomes in linear regression models, whereas the IV estimates reveal even more potent effects of financial literacy. They also indicate that the schooling effect only becomes positive when interacted with financial literacy. Estimated impacts are substantial enough to imply that investments in financial literacy could have large wealth payoffs.
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Behrman, Jere R. (U PA)
Mitchell, Olivia S. (U PA)
Soo, Cindy K. (U PA)
Bravo, David (Centro de Microdatos, U Chile)
D31: Personal Income, Wealth, and Their Distributions
O12: Microeconomic Analyses of Economic Development
D14: Personal Finance
O16: Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance