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Financial Decision Making and Cognition in a Family Context

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  • James P. Smith
  • John McArdle
  • Robert Willis

Abstract

In this paper, the authors studied the association of cognitive traits and in particular numeracy of both spouses on financial outcomes of the family. They found significant effects, particularly for numeracy for financial and non-financial respondents alike, but much larger effects for the financial decision maker in the family. They also examined who makes these financial decisions in the family and why. Once again, cognitive traits such as numeracy were an important component of that decision with larger effects of numeracy for husbands compared to wives.

Suggested Citation

  • James P. Smith & John McArdle & Robert Willis, 2010. "Financial Decision Making and Cognition in a Family Context," Working Papers 785, RAND Corporation.
  • Handle: RePEc:ran:wpaper:785
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    References listed on IDEAS

    as
    1. Alan L. Gustman & Thomas L. Steinmeier & Nahid Tabatabai, 2012. "Financial Knowledge and Financial Literacy at the Household Level," American Economic Review, American Economic Association, pages 309-313.
    2. John J. McArdle & James P. Smith & Robert Willis, 2011. "Cognition and Economic Outcomes in the Health and Retirement Survey," NBER Chapters,in: Explorations in the Economics of Aging, pages 209-233 National Bureau of Economic Research, Inc.
    3. Tullio Jappelli, 2010. "Economic Literacy: An International Comparison," Economic Journal, Royal Economic Society, vol. 120(548), pages 429-451, November.
    4. Rachel Griffith & Rupert Harrison & Gareth Macartney, 2007. "Product Market Reforms, Labour Market Institutions and Unemployment," Economic Journal, Royal Economic Society, vol. 117(519), pages 142-166, March.
    5. Gerard J. vandenBerg & Dorly J.H. Deeg & Maarten Lindeboom & France Portrait, 2010. "The Role of Early-Life Conditions in the Cognitive Decline due to Adverse Events Later in Life," Economic Journal, Royal Economic Society, vol. 120(548), pages 411-428, November.
    6. Smith, J.P., 1996. "Racial and Ethnic Differences in Wealth in the Health and Retirement Study," Papers 96-12, RAND - Reprint Series.
    7. 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.
    8. James Banks & Zoe Oldfield, 2007. "Understanding Pensions: Cognitive Function, Numerical Ability and Retirement Saving," Fiscal Studies, Institute for Fiscal Studies, pages 143-170.
    9. James Banks & Cormac O'Dea & Zoƫ Oldfield, 2010. "Cognitive Function, Numeracy and Retirement Saving Trajectories," Economic Journal, Royal Economic Society, vol. 120(548), pages 381-410, November.
    10. Smith, J-P, 1997. "Inheritances and Bequests," Papers 97-04, RAND - Labor and Population Program.
    11. Smith, James P, 1979. "The Distribution of Family Earnings," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 163-192, October.
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