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Keeping it Simple: Financial Literacy and Rules of Thumb

Author

Listed:
  • Schoar, Antoinette
  • Fischer, Greg
  • Drexler, Alejandro

Abstract

Individuals and business owners engage in an increasingly complex array of financial decisions that are critical for their success and well-being. Yet a growing literature documents that in both developed and developing countries, a large fraction of the population is unprepared to make these decisions. Evidence on potential remedies is limited and mixed. Two randomized trials test the impact of financial training on firm-level and individual outcomes for microentrepreneurs in the Dominican Republic. We find no significant effect from a standard, fundamentals-based accounting training. However, a simplified, rule-of-thumb training produced significant and economically meaningful improvements in business practices and outcomes.

Suggested Citation

  • Schoar, Antoinette & Fischer, Greg & Drexler, Alejandro, 2010. "Keeping it Simple: Financial Literacy and Rules of Thumb," CEPR Discussion Papers 7994, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:7994
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    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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