American Economic Review Vol. 102 No. 3 2012

How Financial Literacy Affects Household Wealth Accumulation

Jere R. Behrman¹; Olivia S. Mitchell²; Cindy K. Soo³; David Bravo⁴

¹ Dept. of Economics and Sociology, School of Arts and Sciences, University of Pennsylvania, 3718 Locust Walk, 160 McNeil, Philadelphia, PA 19104. · ² Wharton School of the University of Pennsylvania, 3620 Locust Walk, 3000 SH-DH, Philadelphia, PA 19104. · ³ Wharton School, University of Pennsylvania, 3620 Locust Walk, 3000 SH-DH, Philadelphia, PA 19104. · ⁴ Centro de Microdatos, Universidad de Chile, Diag Paraguay #257, Torre 26, Santiago, Chile.

Abstract

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.

DOI

10.1257/aer.102.3.300

Volume

102

Issue

3

Pages

300-304

Language

en

Sources

bibtex:phds-export.bib crossref openalex

Cite

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