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The Production of Financial Literacy

Author

Listed:
  • Giovanni Gallipoli

    (Vancouver School of Economics, UBC)

  • Sebastian Gomez-Cardona

    (University of British Columbia)

Abstract

We study the accumulation of financial competencies in a model of dynamic skill formation. We find evidence of complementarities between financial literacy and risk attitudes. Risk tolerance facilitates experimentation and learning-by-doing. Latent risk attitudes and financial literacy are unevenly distributed across households and do not align with general human capital. Linking estimates with data on household portfolios, we show that early-life differences in financial literacy may account for more than half of the standard deviation of wealth by age 60. Dynamic complementarities in skill formation imply that early interventions could reduce later-life inequality while boosting wealth growth.

Suggested Citation

  • Giovanni Gallipoli & Sebastian Gomez-Cardona, 2023. "The Production of Financial Literacy," Working Papers 2023-007, Human Capital and Economic Opportunity Working Group.
    • Handle: RePEc:hka:wpaper:2023-007
    Note: M
    as

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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Gallipoli_Gomez-Cardona_2023_production-financial-literacy.pdf
    File Function: First version, February 15, 2023
    Download Restriction: no
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    More about this item

    Keywords

    financial literacy; inequality; wealth returns; skills; risk attitudes;
    All these keywords.

    JEL classification:

    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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