This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy. We start with an overview of theoretical research which casts financial knowledge as a form of investment in human capital. Endogenizing financial knowledge has important implications for welfare as well as policies intended to enhance levels of financial knowledge in the larger population. Next, we draw on recent surveys to establish how much (or how little) people know and identify the least financially savvy population subgroups. This is followed by an examination of the impact of financial literacy on economic decision-making in the United States and elsewhere. While the literature is still young, conclusions may be drawn about the effects and consequences of financial illiteracy and what works to remedy these gaps. A final section offers thoughts on what remains to be learned if researchers are to better inform theoretical and empirical models as well as public policy.

/pdf/the-economic-importance-of-financial-literacy-theory-and-17mb1g4cfb.pdf

The Economic Importance of Financial Literacy: Theory and Evidence

A detailed review of the education sector in Australia as in the data provided by the 2006 edition of the OECD's annual publication, 'Education at a Glance' is presented. While the data has shown that in almost all OECD countries educational attainment levels are on the rise, with countries showing impressive gains in university qualifications, it also reveals that a large of share of young people still do not complete secondary school, which remains a baseline for successful entry into the labour market.

/pdf/education-at-a-glance-m5vl7o68j5.pdf

Education at a Glance

Flavio Cunha; James Heckman.May, 2007.The technology of skill formation,Report,ChicagoAmerican Economic Association,17

/pdf/the-technology-of-skill-formation-e7jvdavjxk.pdf

The Technology of Skill Formation

Women empowerment and economic development are closely related: in one direction, development alone can play a major role in driving down inequality between men and women; in the other direction, empowering women may benefit development. Does this imply that pushing just one of these two levers would set a virtuous circle in motion? This paper reviews the literature on both sides of the empowerment– development nexus, and argues that the interrelationships are probably too weak to be self-sustaining, and that continuous policy commitment to equality for its own sake may be needed to bring about equality between men and women.

Women Empowerment and Economic Development

This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy. We start with an overview of theoretical research, which casts financial knowledge as a form of investment in human capital. Endogenizing financial knowledge has important implications for welfare, as well as policies intended to enhance levels of financial knowledge in the larger population. Next, we draw on recent surveys to establish how much (or how little) people know and identify the least financially savvy population subgroups. This is followed by an examination of the impact of financial literacy on economic decision making in the United States and elsewhere. While the literature is still young, conclusions may be drawn about the effects and consequences of financial illiteracy and what works to remedy these gaps. A final section offers thoughts on what remains to be learned if researchers are to better inform theoretical and empirical models as well as public policy. (JEL A20, D14, G11, I20, J26)

/pdf/the-economic-importance-of-financial-literacy-theory-and-2yhcozat6n.pdf

The economic importance of financial literacy: theory and evidence

Electricity was born at the dawn of the last century. Households were inundated with a flood of new consumer durables. What was the impact of this consumer durable goods revolution? It is argued here that the consumer goods revolution was conducive to liberating women from the home. To analyse this hypothesis, a Beckerian model of household production is developed. Households must decide whether or not to adopt the new technologies, and whether a married woman should work. Can such a model help to explain the rise in married female labour-force participation that occurred in the last century? Yes. The housewife of the future will be neither a slave to servants nor herself a drudge. She will give less attention to the home, because the home will need less; she will be rather a domestic engineer than a domestic labourer, with the greatest of all handmaidens, electricity, at her service. This and other mechanical forces will so revolutionize the woman’s world that a large portion of the aggregate of woman’s energy will be conserved for use in broader, more constructive fields. Thomas Alva Edison, as interviewed in Good Housekeeping Magazine , LV, no. 4 (October 1912, p. 436)

/pdf/engines-of-liberation-2veh60iavx.pdf

Engines of Liberation

We solve each household’s optimal saving decisions using a life cycle model that incorporates uncertain lifetimes, uninsurable earnings and medical expenses, progressive taxation, government transfers, and pension and social security benefits. With optimal decision rules, we compare, household by household, wealth predictions from the life cycle model using a nationally representative sample. We find, making use of household‐specific earnings histories, that the model accounts for more than 80 percent of the 1992 cross‐sectional variation in wealth. Fewer than 20 percent of households have less wealth than their optimal targets, and the wealth deficit of those who are undersaving is generally small.

/pdf/are-americans-saving-optimally-for-retirement-1aqur73olu.pdf

Are Americans Saving “Optimally” for Retirement?

We reevaluate the role of human capital in determining the wealth of nations. We use standard human capital theory to estimate stocks of human capital and allow the quality of human capital to vary across countries. Our model can explain differences in schooling and earnings profiles and, consequently, estimates of Mincerian rates of return across countries. We find that effective human capital per worker varies substantially across countries. Cross-country differences in Total Factor Productivity (TFP) are significantly smaller than found in previous studies. Our model implies that output per worker is highly responsive to changes in TFP and demographic variables. (JEL E23, I25, J24, J31, O47) No question has perhaps attracted as much attention in the economics literature as “Why are some countries richer than others?” Much of the current work traces back to the classic work of Solow (1956). Solow’s seminal paper suggested that differ ences in the rates at which capital is accumulated could account for differences in output per capita. More recently, following the work of Lucas (1988), human capital disparities were given a central role in the analysis of growth and development. However, the best recent work on the topic reaches the opposite conclusion. Klenow and Rodriguez-Clare (1997); Hall and Jones (1999); Parente and Prescott (2000); and Bils and Klenow (2000) argue that most of the cross-country differences in output per worker are not driven by differences in human capital (or physical capital); rather they are due to differences in a residual, total factor productivity (TFP). In this paper we revisit the development problem. In line with the earlier view, we find that factor accumulation is more important than TFP in accounting for relative incomes across countries. The key difference between our work and previous analyses is in the measurement of human capital. The standard approach largely inspired by the work of Mincer (1974), takes estimates of the rate of return to schooling as building blocks to directly measure a country’s stock of human capital. Implicitly, this method assumes that the marginal contribution to output of one additional year

/pdf/human-capital-and-the-wealth-of-nations-5ofi80yskx.pdf

Human Capital and the Wealth of Nations

What caused the baby boom? And, can it be explained within the context of the secular decline in fertility that has occurred over the last 200 years? The hypothesis is that: (i) The secular decline in fertility is due to the relentless rise in real wages that increased the opportunity cost of having children. (ii) The baby boom is explained by an atypical burst of technological progress in the household sector that occurred in the middle of the last century. This lowered the cost of having children. A model is developed in an attempt to account, quantitatively, for both the baby boom and bust.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID558343_code80708.pdf?abstractid=322821&mirid=1&type=2

The Baby Boom and Baby Bust

What caused the baby boom? And can it be explained within the context of the secular decline in fertility that has occurred over the last 200 years ? The hypothesis is that: (a) The secular decline in fertility is due to the relentless rise in real wages that increased the opportunity cost of having children; (b) The baby boom is explained by an atypical burst of technological progress in the household sector that occurred in the middle of the last century. This lowered the cost of having children. A model is developed in an attempt to account, quantitatively, for both the baby boom and bust.

/pdf/the-baby-boom-and-baby-bust-3nfdyhgkuo.pdf

Ananth Seshadri

Papers

Engines of Liberation

Are Americans Saving “Optimally” for Retirement?

Human Capital and the Wealth of Nations

The Baby Boom and Baby Bust

The Baby Boom and Baby Bust