Financial Literacy, Schooling, and Wealth Accumulation

44 Pages Posted: 8 Oct 2010 Last revised: 26 Nov 2011

See all articles by Jere Behrman

Jere Behrman

University of Pennsylvania - Department of Economics

Olivia S. Mitchell

University of Pennsylvania - The Wharton School; University of Pennsylvania - The Wharton School, Pension Research Council; National Bureau of Economic Research (NBER)

Cindy Soo

affiliation not provided to SSRN

David Bravo

University of Chile

Multiple version iconThere are 2 versions of this paper

Date Written: October 7, 2010

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. Here 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. It also indicates no significant positive effects of schooling attainment conditional on financial literacy in a linear specification, but positive effects when interacted with financial literacy. Estimated impacts are substantial enough to suggest that investments in financial literacy could have large positive payoffs.

Keywords: financial literacy, education, schooling, pension, retirement, wealth,

Suggested Citation

Behrman, Jere R. and Mitchell, Olivia S. and Soo, Cindy and Bravo, David, Financial Literacy, Schooling, and Wealth Accumulation (October 7, 2010). Pension Research Council Working Paper No. 2010-24. Available at SSRN: https://ssrn.com/abstract=1688985 or http://dx.doi.org/10.2139/ssrn.1688985

Jere R. Behrman

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-7704 (Phone)
215-573-2057 (Fax)

Olivia S. Mitchell (Contact Author)

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104-6365
United States

University of Pennsylvania - The Wharton School, Pension Research Council ( email )

3302 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6302
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Cindy Soo

affiliation not provided to SSRN ( email )

David Bravo

University of Chile ( email )

Pío Nono Nº1, Providencia
Santiago, R. Metropolitana 7520421
Chile

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
84
Abstract Views
743
rank
240,210
PlumX Metrics