Keeping it Simple: Financial Literacy and Rules of Thumb
University of Texas at Austin - McCombs School of Business
London School of Economics & Political Science (LSE) - Department of Economics
Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)
CEPR Discussion Paper No. DP7994
Individuals and business owners engage in an increasingly complex array of financial decisions that are critical for their success and well-being. Yet a growing literature documents that in both developed and developing countries, a large fraction of the population is unprepared to make these decisions. Evidence on potential remedies is limited and mixed. Two randomized trials test the impact of financial training on firm-level and individual outcomes for microentrepreneurs in the Dominican Republic. We find no significant effect from a standard, fundamentals-based accounting training. However, a simplified, rule-of-thumb training produced significant and economically meaningful improvements in business practices and outcomes.
Number of Pages in PDF File: 39
Keywords: adult education, business training, entrepreneurship, financial literacy
JEL Classification: C93, D14, D21, I21, J24, O12
Date posted: November 14, 2010
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