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Financial Decision Making and Cognition in a Family Context

  • James P. Smith
  • John J. McArdle
  • Robert Willis

In this article, we study the association of cognitive traits and, in particular, numeracy of both spouses on financial outcomes of the family. We find significant effects, particularly for numeracy for financial and non-financial respondents alike, but much larger effects for the financial decision maker in the family. We also examine who makes these financial decisions in the family and why. Once again, cognitive traits such as numeracy are an important component of that decision with larger effects of numeracy for husbands compared to wives. Copyright � 2010 TheAuthor(s). The Economic Journal � 2010 Royal Economic Society.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 120 (2010)
Issue (Month): 548 (November)
Pages: F363-F380

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Handle: RePEc:ecj:econjl:v:120:y:2010:i:548:p:f363-f380
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  1. van den Berg, Gerard J. & Deeg, Dorly J. H. & Lindeboom, Maarten & Portrait, France, 2010. "The Role of Early-Life Conditions in the Cognitive Decline due to Adverse Events Later in Life," IZA Discussion Papers 4780, Institute for the Study of Labor (IZA).
  2. James P. Smith, 2004. "Inheritances and Bequests," Labor and Demography 0408012, EconWPA.
  3. Alan L. Gustman & Thomas L. Steinmeier & Nahid Tabatabai, 2010. "Financial Knowledge and Financial Literacy at the Household Level," Working Papers wp223, University of Michigan, Michigan Retirement Research Center.
  4. Adeline Delavande & Susann Rohwedder & Robert Willis, 2008. "Preparation for Retirement, Financial Literacy and Cognitive Resources," Working Papers wp190, University of Michigan, Michigan Retirement Research Center.
  5. James Banks & Cormac O'Dea & Zoë Oldfield, 2010. "Cognitive Function, Numeracy and Retirement Saving Trajectories," Economic Journal, Royal Economic Society, vol. 120(548), pages F381-F410, November.
  6. James Banks & Zoe Oldfield, 2007. "Understanding Pensions: Cognitive Function, Numerical Ability and Retirement Saving," Fiscal Studies, Institute for Fiscal Studies, vol. 28(2), pages 143-170, 06.
  7. McArdle, John J. & Smith, James P. & Willis, Robert, 2009. "Cognition and Economic Outcomes in the Health and Retirement Survey," IZA Discussion Papers 4269, Institute for the Study of Labor (IZA).
  8. Smith, J.P., 1996. "Racial and Ethnic Differences in Wealth in the Health and Retirement Study," Papers 96-12, RAND - Reprint Series.
  9. Tullio Jappelli, 2009. "Economic Literacy: An International Comparison," CSEF Working Papers 238, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
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