Keeping It Simple: Financial Literacy and Rules of Thumb

Alejandro Drexler; Greg Fischer; Antoinette Schoar

doi:10.1257/app.6.2.1

journal article Apr 01, 2014

Keeping It Simple: Financial Literacy and Rules of Thumb

Alejandro Drexler Greg Fischer Antoinette Schoar

American Economic Journal: Applied Economics Vol. 6 No. 2 pp. 1-31 · American Economic Association

View at Publisher Save 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. (JEL D4, G21, J24, L25, L26, M41, O16)

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Keeping It Simple: Financial Literacy and Rules of Thumb

Alejandro Drexler, Greg Fischer, Antoinette Schoar

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Metrics

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Citations

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References

Details

Published: Apr 01, 2014
Vol/Issue: 6(2)
Pages: 1-31

Authors

A

Alejandro Drexler

University of Texas Austin, McCombs School of Business, University of Texas at Austin, 2110 Speedway, B6600, Austin, TX 78712 (e-mail: )

G

Greg Fischer

London School of Economics, 32 Lincoln's Inn Fields, 3.09, London WC2A 2AE, United Kingdom, Innovations for Poverty Action, and Jameel Poverty Action Lab (e-mail: )

A

Antoinette Schoar

Sloan School of Management, Massachusetts Institute of Technology, E62-638, 100 Main Street, Cambridge MA 02139, NBER, and ideas42 ()

Cite This Article

Alejandro Drexler, Greg Fischer, Antoinette Schoar (2014). Keeping It Simple: Financial Literacy and Rules of Thumb. American Economic Journal: Applied Economics, 6(2), 1-31. https://doi.org/10.1257/app.6.2.1

Keeping It Simple: Financial Literacy and Rules of Thumb

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