Growing Up Without Finance

76 Pages Posted: 14 Jul 2016 Last revised: 15 Aug 2018

James R. Brown

Iowa State University - Department of Finance

J. Anthony Cookson

University of Colorado at Boulder - Leeds School of Business

Rawley Heimer

Boston College - Department of Finance

Date Written: September 8, 2016

Abstract

Early-life exposure to local financial institutions increases household financial inclusion and leads to long-term improvements in consumer credit outcomes. We identify the effect of local financial markets using Congressional legislation that led to unintended differences in financial market development across Native American reservations. Individuals from financially underdeveloped reservations enter consumer credit markets later, and upon reaching adulthood, have 10 point lower credit scores and 4 percentage point more delinquent accounts. These effects are long-lived and depreciate slowly after individuals move to more developed areas. Formative exposures to local banking improve consumer credit behavior by increasing financial literacy and financial trust.

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 )

Ivy College of Business
Ames, IA 50011
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)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

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