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Financial literacy and socialist education: Lessons from the German reunification

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  • Davoli, Maddalena
  • Hou, Jia

Abstract

A growing body of literature shows the importance of financial literacy in house-holds' financial decisions. However, fewer studies focus on understanding the determinants of financial literacy. Our paper fills this gap by analyzing a specific determinant, the educational system, to explain the heterogeneity in financial literacy scores across Germany. We suggest that the lower financial literacy observed in East Germany is partially caused by a different institutional framework experienced during the Cold War, more specifically, by the socialist educational system of the GDR which affected specific cohorts of individuals. By exploiting the unique set-up of the German reunification, we identify education as a channel through which institutions and financial literacy are related in the German context.

Suggested Citation

  • Davoli, Maddalena & Hou, Jia, 2018. "Financial literacy and socialist education: Lessons from the German reunification," SAFE Working Paper Series 217, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:217
    DOI: 10.2139/ssrn.3224207
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    References listed on IDEAS

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    Keywords

    financial literacy determinants; socialist education; German reunification; DiD;
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