Keeping It Simple: Financial Literacy and Rules of Thumb
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Schoar_Keeping it.pdf
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149.69 KB
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Author(s)
Drexler, Alejandro
Fischer, Greg
Schoar, Antoinette
Date Issued
April 2014
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
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.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
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DOI of Published Version
https://doi.org/10.1257/app.6.2.1
