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Keeping it simple: financial literacy and rules of thumb

Drexler, Alejandro and Fischer, Gregory and Schoar, Antoinette (2014) Keeping it simple: financial literacy and rules of thumb. American Economic Journal: Applied Economics, 6 (2). pp. 1-31. ISSN 1945-7782

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Identification Number: 10.1257/app.6.2.1

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.

Item Type: Article
Official URL: http://www.aeaweb.org/aej/app/index.php
Additional Information: © 2014 American Economic Association
Divisions: Economics
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
JEL classification: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L24 - Contracting Out; Joint Ventures; Technology Licensing
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification and Scope, Age, Profit, and Sales
M - Business Administration and Business Economics; Marketing; Accounting > M4 - Accounting and Auditing > M41 - Accounting
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
Sets: Departments > Economics
Collections > Economists Online
Date Deposited: 28 Apr 2014 09:00
Last Modified: 26 Apr 2016 09:56
URI: http://eprints.lse.ac.uk/id/eprint/46797

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