Growing Up Without Finance

66 Pages Posted: 14 Jul 2016 Last revised: 7 Feb 2017

James R. Brown

Iowa State University - Department of Finance

J. Anthony Cookson

University of Colorado at Boulder - Leeds School of Business

Rawley Heimer

Federal Reserve Bank of Cleveland

Date Written: September 8, 2016

Abstract

Early-life exposure to local financial institutions increases household financial inclusion and improves financial health thereafter. We identify the effect of local financial markets using an externally-imposed law that led to sharp differences in credit market development across Native American reservations. Individuals who grow up on financially underdeveloped reservations enter formal credit markets later than individuals from financially developed reservations, and as a result, have persistently lower credit scores. Although financial health improves after moving from a reservation, it takes longer than a decade for the credit scores of individuals leaving financially underdeveloped areas to converge with other borrowers.

Keywords: Household finance, Law and finance, Consumer credit, Early-life experiences, Banking development

JEL Classification: G21, K40, P48

Suggested Citation

Brown, James R. and Cookson, J. Anthony and Heimer, Rawley, Growing Up Without Finance (September 8, 2016). 7th Miami Behavioral Finance Conference 2016. Available at SSRN: https://ssrn.com/abstract=2809164 or http://dx.doi.org/10.2139/ssrn.2809164

James R. Brown

Iowa State University - Department of Finance ( email )

College of Business
Ames, IA 50011-2063
United States
5152944668 (Phone)

J. Anthony Cookson

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Rawley Heimer (Contact Author)

Federal Reserve Bank of Cleveland ( email )

Mailstop 32
Waltham, MA 02454-9110
United States

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