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Keeping It Simple: Financial Literacy and Rules of Thumb

Author(s)
Drexler, Alejandro; Fischer, Greg; Schoar, Antoinette
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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.
Date issued
2014-04
URI
http://hdl.handle.net/1721.1/88086
Department
Sloan School of Management
Journal
American Economic Journal: Applied Economics
Publisher
American Economic Association
Citation
Drexler, Alejandro, Greg Fischer, and Antoinette Schoar. “ Keeping It Simple: Financial Literacy and Rules of Thumb † .” American Economic Journal: Applied Economics 6, no. 2 (April 2014): 1–31.
Version: Author's final manuscript
ISSN
1945-7782
1945-7790

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