Keeping it simple: financial literacy and rules of thumb

Drexler, Alejandro, 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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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
Date Deposited:	28 Apr 2014 09:00
Last Modified:	14 Nov 2024 01:21
URI:	http://eprints.lse.ac.uk/id/eprint/46797

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