Financial Literacy and Socialist Education: Lessons from the German Reunification

49 Pages Posted: 1 Aug 2018 Last revised: 28 Aug 2018

See all articles by Maddalena Davoli

Maddalena Davoli

Goethe University Frankfurt, House of Finance (HoF), Graduate School of Economics, Finance and Management (GSEFM), Students

Jia Hou

Goethe University Frankfurt

Date Written: August 2018

Abstract

A growing body of literature shows the importance of financial literacy in households' financial decisions. However, fewer studies focus on understanding the determinants of financial literacy. Our paper fills this gap by analyzing a specific determinant, the educational system, to explain the heterogeneity in financial literacy scores across Germany. We suggest that the lower financial literacy observed in East Germany is partially caused by a different institutional framework experienced during the Cold War, more specifically, by the socialist educational system of the GDR which affected specific cohorts of individuals. By exploiting the unique set-up of the German reunification, we identify education as a channel through which institutions and financial literacy are related in the German context.

Keywords: financial literacy determinants, socialist education, German reunification, DiD

JEL Classification: I24; I26; G40

Suggested Citation

Davoli, Maddalena and Hou, Jia, Financial Literacy and Socialist Education: Lessons from the German Reunification (August 2018). SAFE Working Paper No. 217. Available at SSRN: https://ssrn.com/abstract=3224207 or http://dx.doi.org/10.2139/ssrn.3224207

Maddalena Davoli (Contact Author)

Goethe University Frankfurt, House of Finance (HoF), Graduate School of Economics, Finance and Management (GSEFM), Students ( email )

Gr├╝neburgplatz 1
Frankfurt
Germany

Jia Hou

Goethe University Frankfurt ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

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