Smart Money? The Effect of Education on Financial Outcomes

By Shawn Cole, anna. paulson, G. Shastry. 2014

237 citations recorded by the source corpus.

Household financial decisions are important for household welfare, economic growth, and financial stability. Yet our understanding of the determinants of financial decision making is limited. Exploiting exogenous variation in state compulsory schooling laws in both standard and two-sample instrumental variable strategies, we show that education increases financial market participation, measured by investment income and equities ownership, while dramatically reducing the probability that an individual declares bankruptcy, experiences a foreclosure, or is delinquent on a loan. Further results and a simple calibration suggest that the result is driven by changes in savings or investment behavior, rather than simply increased labor earnings.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/cef567bb5db20638c92a7a9d3de7183bdebc8505

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Citations in the corpus

The effect of education on poverty: A European perspective (2021, result): “The results for the sub-indicators relative income poverty and severe material deprivation resemble the findings for the US in Oreopoulos (2007) and Cole et al. (2014), respectively.”
Financial Literacy and Financial Behaviour: Experimental Evidence from Rural Rwanda (2016, background): “Cole et al. (2014) study the impact of education on ﬁnancial market participation and credit management in the US.”
Financial Literacy, Portfolio Choice and Financial Well-Being (2016, background): “2011; Agarwal and Mazumder 2013), awareness of stocks (Guiso and Jappelli 2005), education level (Cole et al. 2014) and social interactions (Hong et al.”
Learning to Take Risks? The Effect of Education on Risk-Taking in Financial Markets (2018, unknown): “Most closely related to our own work is that by Cole, Paulson, and Shastry (2014) who use variation in state compulsory schooling laws between 1914 and 1978 in the US to examine the effect of education on a variety of wealth and credit measures.”
High School Curriculum and Financial Outcomes: The Impact of Mandated Personal Finance and Mathematics Courses (2016, result): “These results complement the finding reported in Cole, Paulson, and Shastry (2014), which uses compulsory school laws to document that additional years of schooling increase financial market participation.”
Who Wears the Pants? Gender Identity Norms and Intrahousehold Financial Decision‐Making (2017, unknown): “Following Cole, Paulson, and Shastry (2014), I define households that participate in the financial market as those who report investment losses or investment income greater than $500.6 The $500 cutoff point is set to exclude households with only savings accounts that generate small amounts of…”
The Role of a Manager’s Intangible Capabilities in Resource Acquisition and Sustainable Competitive Performance (2019, background): “Financial education reconfigures financial and non-financial resources that may provide high economic growth and financial stability [51].”