Financial Literacy Externalities

Abstract

This paper uses unique administrative data and a quasi-field experiment of exogenous allocation in Sweden to estimate medium-and longer-run effects on financial behavior from exposure to financially literate neighbors. It contributes evidence of causal impact of exposure and of a social multiplier of financial knowledge, but also of unfavorable distributional aspects of externalities. Exposure promotes saving in private retirement accounts and stockholding, especially when neighbors have economics or business education, but only for educated households and when interaction possibilities are substantial. Findings point to transfer of knowledge rather than mere imitation or effects through labor, education, or mobility channels.

Sources of Inaction in Household Finance: Evidence from the Danish Mortgage Market

“…Inspection of the coe¢ cients on dummy variables in Table 3 shows that some demographic characteristics are associated with faster re…nancing through both channels. Financial literacy of the household or the family has this e¤ect, consistent with recent work highlighting the bene…cial impacts of …nancial education on a range of household …nance decisions (see, e.g., Haliassos, Jansson, and Karabulut, 2019), as do life events such as getting married or having children. 22 On the other hand, there are also characteristics that move people closer to the rational benchmark in one dimension but further away in the other.…”

What determines financial literacy in Japan?

“…Koonce et al (2008) showed that society, family, peers, and the media contribute to people's financial literacy. Haliassos et al (2016) provided evidence of financial knowledge transfers through social interactions. They found that neighbors' financial knowledge had an important mediating effect on the financial behavior of a household.…”

Peer Advice on Financial Decisions: A case of the blind leading the blind?

“…Some have argued for targeting interventions at influencers and relying on social di↵usion to leverage the e↵ects of financial education (see, e.g., Haliassos, Jansson and Karabulut (2017) and Ouimet and Tate (2017)). Because the indirect beneficial e↵ects of education in our experiment arise from mimicry rather than from improved conceptual understanding, our experiment calls the e↵ectiveness of many such di↵usion strategies into question.…”

“…3 Relatedly, Linnainmaa, Melzer and Previtero (2016) find that even professional financial advisors often make mistakes with their private investments, and successfully convince their clients to do likewise. 1 2015; Haliassos, Jansson and Karabulut, 2017). For many (but not all) purposes, this simplification is artificial.…”

“…While the data ofHaliassos, Jansson and Karabulut (2017) point to a social multiplier of education, their identification is based on whether peers happen to be educated or not. Therefore, while the indirect e↵ects of financial education they document could be caused by the education itself, they could also be a consequence of the di↵erent personalities and skills of individuals who chose to educate themselves.12 Another di↵erence is that all treatments inKimbrough, McGee and Shigeoka (2017) involve an education intervention.…”