The Effects of Education on Financial Outcomes: Evidence from Kenya

Abstract

We study the effects of education on the financial outcomes of youth using Kenya's introduction of Free Primary Education (FPE) in 2003 as an exogenous shock to schooling. Our identification strategy compares changes across cohorts, and across regions with differing levels of pre-FPE enrollment. We find that FPE is associated with increases in educational attainment and increased use of formal financial services, particularly through mobile banking. Examining potential mechanisms, we find increases in employment rates and incomes but limited improvements in effective numeracy, retirement planning, and subjective financial well-being. Our results suggest that education primarily increased financial inclusion by raising labor earnings, with little direct impact on financial capability.

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