Financial Literacy, Schooling, and Wealth Accumulation

Jere Behrman, Olivia Mitchell, Cindy Soo and David Bravo

No 16452, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Financial literacy and schooling attainment have been linked to household wealth accumulation. Yet prior findings may be biased due to noisy measures of financial literacy and schooling, as well as unobserved factors such as ability, intelligence, and motivation that could enhance financial literacy and schooling but also directly affect wealth accumulation. We use a new household dataset and an instrumental variables approach to isolate the causal effects of financial literacy and schooling on wealth accumulation. While financial literacy and schooling attainment are both strongly positively associated with wealth outcomes in linear regression models, our approach reveals even stronger and larger effects of financial literacy on wealth. Estimated impacts are substantial enough to suggest that investments in financial literacy could have large positive effects on household wealth accumulation.

JEL-codes: G14 G23 I21 I3 J14 J24 J26 J32 (search for similar items in EconPapers)
Date: 2010-10
Note: AG
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Citations: View citations in EconPapers (60)

Published as Behrman, Jere, Olivia S. Mitchell, Cindy Soo, and David Bravo. (2012). “Financial Literacy, Schooling, and Wealth Accumulation.” American Economic Review P&P. 102(3): 300–304.

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