How Financial Literacy Affects Household Wealth Accumulation
Jere R. Behrman
Olivia S. Mitchell
Cindy K. Soo
American Economic Review
no. 3, May 2012
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.
Behrman, Jere R., Olivia S. Mitchell, Cindy K. Soo, and David Bravo.
"How Financial Literacy Affects Household Wealth Accumulation."
American Economic Review,
Personal Income, Wealth, and Their Distributions
Microeconomic Analyses of Economic Development
Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance