Financial Literacy, Schooling, and Wealth Accumulation

TitleFinancial Literacy, Schooling, and Wealth Accumulation
Publication TypeReport
Year of Publication2010
AuthorsBehrman, JR, Mitchell, OS, Soo, C, Bravo, D, The Wharton School,
Series TitlePARC Working Paper Series
Document NumberWPS 10-06
InstitutionPension Research Council, University of Pennsylvania
CityPhiladelphia, PA
Call Numbernewpubs20101012_Behrman.pdf
KeywordsEducational attainment, Financial literacy, household wealth

Financial literacy and schooling attainment have been linked to household wealth accumulation. Yet prior findings may be biased due to noisy measures of financial literacy and schooling, as well as unobserved factors such as ability, intelligence, and motivation that could enhance financial literacy and schooling but also directly affect wealth accumulation. Here we use a new household dataset and an instrumental variables approach to isolate the causal effects of financial literacy and schooling on wealth accumulation. While financial literacy and schooling attainment are both strongly positively associated with wealth outcomes in linear regression models, our approach reveals even stronger and larger effects of financial literacy on wealth. It also indicates no significant positive effects of schooling attainment conditional on financial literacy in a linear specification, but positive effects when interacted with financial literacy. Estimated impacts are substantial enough to suggest that investments in financial literacy could have large positive payoffs.

Endnote Keywords

Financial literacy/education/wealth Accumulation

Endnote ID


Citation Key5795