Financial Literacy and Socialist Education: Lessons from the German Reunification
49 Pages Posted: 1 Aug 2018 Last revised: 28 Aug 2018
Date Written: August 2018
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: Suggested Citation