Abstract. We study the accumulation of financial competencies in a model of dynamic skill formation. We find evidence of complementarities between financial literacy, wealth and risk attitudes. Risk tolerance and wealth facilitate experimentation and learning-by-doing. Latent risk attitudes and financial literacy are unevenly distributed across households and do not align with general human capital. Linking estimates with data on household portfolios, we show that early-life differences in financial literacy and its accumulation in the life-cycle may account for about one-fifth of the standard deviation of wealth by age 60. Dynamic complementarities in skill formation imply that early interventions may reduce later-life inequality while boosting average wealth growth.
Citation
@article{gallipoli-gomez-2023,
title={The Production of Financial Literacy},
author={Gallipoli, Giovanni and Gomez, sebastian},
journal={mimeo, UBC},
year={2023}
}