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The Production of Financial Literacy

Giovanni Gallipoli () and Sebastian Gomez-Cardona ()

No 2023-007, Working Papers from Human Capital and Economic Opportunity Working Group

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.

Keywords: financial literacy; inequality; wealth returns; skills; risk attitudes (search for similar items in EconPapers)
JEL-codes: D31 D81 I24 J24 (search for similar items in EconPapers)
Date: 2023-02
New Economics Papers: this item is included in nep-edu, nep-fdg and nep-fle
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http://humcap.uchicago.edu/RePEc/hka/wpaper/Gallip ... nancial-literacy.pdf First version, February 15, 2023 (application/pdf)

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