Why Do Financially Illiterate Students Perceive Lower Education Returns? Evidence From a Survey in Rural China
Bibliographic Data
| ID | 3272527 |
|---|---|
| Authors | Chao Yuan (0000-0001-7902-802X, Peking University, corresponding author), Xiaoxiao Wang (0000-0002-5851-3525, Peking University), Lin Li (0000-0003-2896-7988, University of London), Li Lin (0000-0002-7584-9186) |
| Year | 2023 |
| Volume | 13 |
| Issue | 2 |
| Publication date | 2023-04-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | SAGE Open (JOURNAL) |
| Journal identifiers | ISSN: 2158-2440 • E-ISSN: 2158-2440 |
| Publisher | SAGE Publications Inc (PUBLISHER) |
| DOI | 10.1177/21582440231178192 |
| OpenAlex | W4380050949 |
| Language | EN |
| Citations received | 1 |
| References cited | 41 |
This paper studies how students' financial literacy affects their perceptions of returns to schooling and consequently their schooling decisions. We first propose a model of human capital accumulation where financially illiterate students exhibit a cognitive bias of "ironing heuristic." With this decision heuristic, students tend to linearize the relationship between educational investments and future earnings, resulting in underestimated returns to education and inadequate study efforts. Using survey data from four rural middle schools in Southwest China, we then find a positive correlation between financial literacy and students' perceived returns to education. In particular, the estimate of students' perceived earnings function shows that its curvature significantly increases with students' financial knowledge of compound interest, supporting the assumption in the theory. Our findings suggest that promoting students' financial literacy may be an effective policy to motivate students to learn at school, especially in poor rural areas. JEL: I26, G53 (Financial Literacy), D91, J24
China · Demographic economics · Earnings · Economic growth · Economics · Financial literacy · Human capital · Human capital theory · Literacy · Political science · Survey data collection · Financial Literacy, Pension, Retirement Analysis · Housing Market and Economics · Intergenerational and Educational Inequality Studies · Psychology · Finance
Pisa 2015 Assessment and Analytical Framework
Rebels With a Cause? Adolescent Defiance From the Perspective of Reactance Theory and Self-Determination Theory
Nudging in education
The Economic Importance of Financial Literacy
The (Perceived) Returns to Education and the Demand for Schooling
The Influence of Parent Education and Family Income on Child Achievement
School Dropouts and Conditional Cash Transfers
Can migration reduce educational attainment? Evidence from Mexico
Dropping out
Peer relations and dropout behavior
Giving kids a head start
Education choices and returns to schooling
The Risk Element in Occupational and Educational Choices
Learning as accumulation
Effects of Parents' Migration on the Education of Children Left Behind in Rural China
Social Capital in the Creation of Human Capital
| Unique citing works | 1 |
|---|---|
| Citations per year | 0.33 |
| Citation span | 2023 - 2023 (1) |
| Citation velocity | historical |
| Highly cited | No |
| Citation types | Neutral: 1 |