Abstract

http://ssrn.com/abstract=1317298
 
 

References (52)



 


 



Smart Money: The Effect of Education on Financial Behavior


Shawn Allen Cole


Harvard Business School

Anna L. Paulson


Federal Reserve Bank of Chicago

Gauri Kartini Shastry


University of Virginia

April 11, 2012

Harvard Business School Finance Working Paper No. 09-071

Abstract:     
Household financial decisions are important for both households and the greater economy. Yet, our understanding of the process of financial decision-making is limited. Applying standard and two-sample instrumental variables strategies to census and credit bureau data, we provide the first precise, causal estimates of the effects of education on financial behavior. Education has large effects on financial market participation and smaller, but statistically and economically significant effects on financial management. We find that education improves credit scores, and dramatically reduces the probability of declaring bankruptcy or suffering foreclosure during the financial crisis. Examining mechanisms, we show that cognitive ability increases financial participation, and discuss how education may affect decision-making through: attitudes, borrowing behavior, discount rates, risk-aversion, and the influence of coworkers and neighbors.

Number of Pages in PDF File: 48

working papers series


Download This Paper

Date posted: December 17, 2008 ; Last revised: April 11, 2012

Suggested Citation

Cole, Shawn Allen and Paulson, Anna L. and Shastry, Gauri Kartini, Smart Money: The Effect of Education on Financial Behavior (April 11, 2012). Harvard Business School Finance Working Paper No. 09-071. Available at SSRN: http://ssrn.com/abstract=1317298 or http://dx.doi.org/10.2139/ssrn.1317298

Contact Information

Shawn Allen Cole (Contact Author)
Harvard Business School ( email )
Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
Anna L. Paulson
Federal Reserve Bank of Chicago ( email )
230 South LaSalle Street
Chicago, IL 60604
United States
312 322 2169 (Phone)
Gauri Kartini Shastry
University of Virginia (UVA) ( email )
1400 University Ave
Charlottesville, VA 22903
United States
Feedback to SSRN


Paper statistics
Abstract Views: 4,788
Downloads: 1,297
Download Rank: 7,307
References:  52
Paper comments
No comments have been made on this paper

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.640 seconds