How Financial Literacy Affects Household Wealth Accumulation
Jere R. Behrman, Olivia S. Mitchell, Cindy K. Soo, David Bravo
American Economic Review · 2012 · Volume 102 · Issue 3
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.
Keywords
Personal Income, Wealth, and Their Distributions, Microeconomic Analyses of Economic Development, Personal Finance, Economic Development: Financial Markets, Saving and Capital Investment, Corporate Finance and Governance
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