Financial Literacy and Economic Outcomes
29 Pages Posted: 3 Jan 2019 Last revised: 20 Jun 2019
Date Written: March 26, 2019
We explore the relationship between financial literacy and self-reported economic outcomes using survey data from the United States. Our dataset includes a large number of covariates from the National Financial Capability Study, and we use a new econometric technique developed by Hahn et al. (2018a) to test whether changes in financial literacy are positively related to changes in economic outcomes while controlling for confounders utilizing a Bayesian regression model with strong shrinkage (Carvalho et al., 2010). The estimate of the treatment parameter on financial literacy is positive, and the regularized regression treatment effect estimates provide more confidence about this finding than ordinary least squares. The results also provide empirical evidence for Lusardi et al. (2017)’s conclusion that well-educated individuals gain from financial literacy education.
Keywords: Financial Literacy, Economic Outcomes, Treatment Effect Estimation, Machine Learning
JEL Classification: D1
Suggested Citation: Suggested Citation