American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
Cognitive Abilities and Household Financial Decision Making
American Economic Journal: Applied Economics
vol. 5,
no. 1, January 2013
(pp. 193–207)
Abstract
We analyze the effects of cognitive abilities on two examples of consumer financial decisions where suboptimal behavior is well defined. The first example features the optimal use of credit cards for convenience transactions after a balance transfer and the second involves a financial mistake on a home equity loan application. We find that consumers with higher overall test scores, and specifically those with higher math scores, are substantially less likely to make a financial mistake. These mistakes are generally not associated with nonmath test scores. (JEL D14, G21)Citation
Agarwal, Sumit, and Bhashkar Mazumder. 2013. "Cognitive Abilities and Household Financial Decision Making." American Economic Journal: Applied Economics, 5 (1): 193–207. DOI: 10.1257/app.5.1.193Additional Materials
JEL Classification
- D14 Personal Finance
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
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