Keeping It Simple: Financial Literacy and Rules of Thumb

Drexler, Alejandro; Fischer, Gregory; Schoar, Antoinette

doi:10.1257/app.6.2.1

Cited by 494 publications

(476 citation statements)

References 31 publications

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“…A decade ago, Hausman (2005) highlighted how much of the existing research had examined product and process innovations and neglected non-technological innovation, such as new management practices. Since then, management and managerial skills have received increased attention as a factor explaining differences in firms' performance in developing countries with evidence spanning various geographical areas (Bloom et al, 2013;Drexler et al, 2014;Karlan and Valdivia, 2011;Mano et al, 2012). Moreover, we found some qualitative and narrative evidence of the benefit of market innovations on firms, mainly in the informal sector (Hall et al, 2012;Ramani et al, 2012).…”

Section: 1mentioning

confidence: 61%

Innovation and productivity in formal and informal firms in Ghana

Mohnen

Zanello

2018

Technological Forecasting and Social Change

139

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Section: 1mentioning

confidence: 61%

Innovation and productivity in formal and informal firms in Ghana

Mohnen

Zanello

2018

Technological Forecasting and Social Change

139

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“…Valdivia (2014) finds positive short-and mid-term effects of business training on revenues and business practice for existing entrepreneurs in Peru. In the Dominican Republic, Drexler, Fischer and Schoar (2010) find that simple rules of thumb increase the likelihood of keeping accounting records, calculating monthly revenues, and separating household and business records. However, more complex training does not affect business practice.…”

Section: Contextmentioning

confidence: 99%

Micro entrepreneurship support programme in Chile

Martínez¹,

Puentes²,

Ruiz-Tagle³

2016

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The International Initiative for Impact Evaluation (3ie) is an international grant-making NGO promoting evidence-informed development policies and programmes. We are the global leader in funding and producing high-quality evidence of what works, how, why and at what cost. We believe that better and policy-relevant evidence will make development more effective and improve people's lives. 3ie impact evaluations3ie-supported impact evaluations assess the difference a development intervention has made to social and economic outcomes. 3ie is committed to funding rigorous evaluations that include a theory-based design, use the most appropriate mix of methods to capture outcomes and are useful in complex development contexts. About this report3ie accepted the final version of this report, Micro entrepreneurship support programme in Chile, as partial fulfilment of requirements under grant OW2.200 issued under Open Window 2. The content has been copyedited and formatted for publication by 3ie. Due to unavoidable constraints at the time of publication, a few of the tables or figures may be less than optimal. All of the content is the sole responsibility of the authors and does not represent the opinions of 3ie, its donors or its Board of Commissioners. Any errors and omissions are also the sole responsibility of the authors. All affiliations of the authors listed in the title page are those that were in effect at the time the report was accepted. Any comments or queries should be directed to the corresponding author, Jaime Ruiz-Tagle V. at jaimert@econ.uchile.cl.Funding for this impact evaluation was provided by 3ie's donors, which include UK aid, the Bill & Melinda Gates Foundation, the Hewlett Foundation and 12 other 3ie members that provide institutional support. A complete listing is provided on the 3ie website at http://www.3ieimpact.org/en/about/3ie-affiliates/3ie-members/ AbstractUsing a randomized controlled trial of a large-scale, publicly run micro entrepreneurship program in Chile, we assess the effectiveness of business training and asset transfers to the poor over a period of 46 months. We find that the program significantly increases employment by 15.3 percentage points in the short run (mostly through self employment) and 6.8 in the long run (mostly through wage work). This is consistent with the hypothesis that skills taught during the training lessons are useful for wage work, which is supported by the finding that quality of the intervention positively affects wage work, especially in the long run.iii

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“…A number of papers have noted that the decision to take on expensive debt is correlated with household characteristics such as financial literacy (Lusardi and Mitchell, 2014;Lusardi and Tufano, 2009), cognitive abilities (Agarwal and Mazumder, 2013;Stango and Zinman, 2009), and age (Agarwal et al, 2009). Others have shown that these behaviors can be lessened through disclosure and framing (Bertrand and Morse, 2011;Stango and Zinman, 2011), subsidies (Cole et al, 2011), or simplification (Drexler et al, 2014). Research on the exact choice inefficiencies that contribute to overpayment for debt highlight the willingness to search across credit contracts (Stango and Zinman, 2016;Zinman, 2015).…”

Section: Introductionmentioning

confidence: 99%

Borrowers in Search of Feedback: Evidence from Consumer Credit Markets

Liskovich

Shaton

2017

FEDS

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We study recent technological innovation in credit markets and document their role in providing information to households. We show that households value the ability to learn detailed information about their cost of credit. This function is most valued by less creditworthy households with less experience in credit markets. To measure the demand for information provision we exploit a quasi-natural experiment in an online consumer credit market. A large lending platform unexpectedly switched from pricing loans through an auction mechanism to centralized pricing determined by broad credit grade. This change resulted in an instant decrease in the amount of tailored feedback available to market participants. We find that less experienced households immediately and disproportionately exit the market and the response is concentrated among higher risk households. We rule out alternative explanations such as changes in access to credit, borrower risk profiles, and interest rate levels. Our findings point to a potentially important role for financial innovation: enabling less experienced households to more easily learn about their credit market options. * We thank

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Keeping It Simple: Financial Literacy and Rules of Thumb

Cited by 494 publications

References 31 publications

Innovation and productivity in formal and informal firms in Ghana

Innovation and productivity in formal and informal firms in Ghana

Micro entrepreneurship support programme in Chile

Borrowers in Search of Feedback: Evidence from Consumer Credit Markets

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