OPTIMAL FINANCIAL KNOWLEDGE AND WEALTH INEQUALITY
per Annamaria Lusardi, Pierre-Carl Michaud, and Olivia S. Mitchell.
Publicat el 9 d’Octubre de 2014 en GFLEC Working Paper Series
We show that financial knowledge is a key determinant of wealth inequality in a stochastic lifecycle model with endogenous financial knowledge accumulation, where financial knowledge enables individuals to better allocate lifetime resources in a world of uncertainty and imperfect insurance. Moreover, because of how the U.S. social insurance system works, better-educated individuals have most to gain from investing in financial knowledge. Our parsimonious specification generates substantial wealth inequality relative to a one-asset saving model and one where returns on wealth depend on portfolio composition alone. We estimate that 30-40 percent of retirement wealth inequality is accounted for by financial knowledge.
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