This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Review
  4. May 2012
  5. How Financial Literacy Affects Household Wealth Accumulation

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

How Financial Literacy Affects Household Wealth Accumulation

  • Jere R. Behrman
  • Olivia S. Mitchell
  • Cindy K. Soo
  • David Bravo
American Economic Review
vol. 102, no. 3, May 2012
(pp. 300–304)
Download Full Text PDF

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.

Citation

Behrman, Jere R., Olivia S. Mitchell, Cindy K. Soo, and David Bravo. 2012. "How Financial Literacy Affects Household Wealth Accumulation." American Economic Review, 102 (3): 300–304. DOI: 10.1257/aer.102.3.300

JEL Classification

  • D31 Personal Income, Wealth, and Their Distributions
  • O12 Microeconomic Analyses of Economic Development
  • D14 Personal Finance
  • O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance