Financial literacy and socialist education: Lessons from the German reunification

Maddalena Davoli () and Jia Hou

No 217, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: A growing body of literature shows the importance of financial literacy in house-holds' financial decisions. However, fewer studies focus on understanding the determinants of financial literacy. Our paper fills this gap by analyzing a specific determinant, the educational system, to explain the heterogeneity in financial literacy scores across Germany. We suggest that the lower financial literacy observed in East Germany is partially caused by a different institutional framework experienced during the Cold War, more specifically, by the socialist educational system of the GDR which affected specific cohorts of individuals. By exploiting the unique set-up of the German reunification, we identify education as a channel through which institutions and financial literacy are related in the German context.

Keywords: financial literacy determinants; socialist education; German reunification; DiD (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-edu, nep-eur and nep-fle
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:217

DOI: 10.2139/ssrn.3224207

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