Giovanni Gallipoli
Sebastian Gomez-Cardona

We study the accumulation of financial competencies in a model of dynamic skill formation. We find evidence of complementarities between financial literacy and risk attitudes. Risk tolerance facilitates 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 may account for more than half of the standard deviation of wealth by age 60. Dynamic complementarities in skill formation imply that early interventions could reduce later-life inequality while boosting wealth growth.

Publication Type
Working Paper
File Description
First version, February 15, 2023
JEL Codes
I24: Education and Inequality
D31: Personal Income, Wealth, and Their Distributions
J24: Human Capital; Skills; Occupational Choice; Labor Productivity
D81: Criteria for Decision-Making under Risk and Uncertainty
financial literacy
wealth returns
risk attitudes