Publications
Publications
- July 2014
- Review of Financial Studies
Smart Money? The Effect of Education on Financial Outcomes
By: Shawn A. Cole, Anna Paulson and Gauri Kartini Shastry
Abstract
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 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 the result is driven by changes in savings or investment behavior, rather than simply increased labor earnings.
Keywords
Citation
Cole, Shawn A., Anna Paulson, and Gauri Kartini Shastry. "Smart Money? The Effect of Education on Financial Outcomes." Review of Financial Studies 27, no. 7 (July 2014): 2022–2051.