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Journal of Financial Economics Vol. 134 No. 3 2019

Growing up without finance

James Robert Brown1,2,3,4; J. Anthony Cookson3,4,1,2; Rawley Z. Heimer3,4,2,1

1 University of Colorado Boulder · 2 Boston College · 3 Iowa State University · 4 Ivy Tech Community College of Indiana

Abstract

Early life exposure to local financial institutions increases household financial inclusion and leads to long-term improvements in consumer credit outcomes. We identify the effect of local financial markets using Congressional legislation that led to unintended differences in financial market development across Native American reservations. Individuals from financially underdeveloped reservations enter consumer credit markets later, and upon reaching adulthood, have ten point lower credit scores and four percentage point more delinquent accounts. These effects are long-lived and depreciate slowly after individuals move to more developed areas. Formative exposures to local banking improve consumer credit behavior by increasing financial literacy and financial trust.

DOI
10.1016/j.jfineco.2019.05.006
Volume
134
Issue
3
Pages
591-616
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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