Keeping it simple: financial literacy and rules of thumb

Alejandro Drexler (), Gregory Fischer and Antoinette Schoar

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Micro-entrepreneurs often lack the financial literacy required to make important financial decisions. We conducted a randomized evaluation with a bank in the Dominican Republic to compare the impact of two distinct programs: standard accounting training versus a simplified, rule-of-thumb training that taught basic financial heuristics. The rule-of-thumb training significantly improved firms' financial practices, objective reporting quality, and revenues. For micro-entrepreneurs with lower skills or poor initial financial practices, the impact of the rule-of-thumb training was significantly larger than that of the standard accounting training, suggesting that simplifying training programs might improve their effectiveness for less sophisticated individuals.

JEL-codes: G21 L24 L25 M41 O16 (search for similar items in EconPapers)
Date: 2014-04
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Citations: View citations in EconPapers (189)

Published in American Economic Journal: Applied Economics, April, 2014, 6(2), pp. 1-31. ISSN: 1945-7782

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Related works:
Journal Article: Keeping It Simple: Financial Literacy and Rules of Thumb (2014)
Working Paper: Keeping it Simple: Financial Literacy and Rules of Thumb (2010)
Working Paper: Keeping it simple: financial literacy and rules of thumb (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:46797

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