Does general education prevent personal financial distress? 

Abstract

We employ two quasi-natural experiments to study the impact of general education on personal financial distress in Finland in 2020. In Experiment 1, staggered comprehensive school reform which introduced later tracking and a more academic curriculum is associated with a lower probability of financial distress after the age of 50. In Experiment 2, we find that individuals who experienced a structural drop in general secondary education supply through school closures are more likely to have delinquent consumer loans in their 20s and early 30s. In both experiments, we identify the effect only for children with less-educated parents. Increased general education seems to lower financial distress over and beyond lifetime education and income channels in Experiment 1. We attribute the remaining effect to later tracking, a more academic curriculum, and peers.

Keywords: personal financial distress, payment default, general education, comprehensive school reform, borrowing, education supply