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Growing up without finance

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  • Brown, James R.
  • Cookson, J. Anthony
  • Heimer, Rawley Z.

Abstract

Early life exposure to local financial institutions increases household financial inclusion and leads to long-term improvements in consumer credit outcomes. We identify the effect of local financial markets using Congressional legislation that led to unintended differences in financial market development across Native American reservations. Individuals from financially underdeveloped reservations enter consumer credit markets later, and upon reaching adulthood, have ten point lower credit scores and four percentage point more delinquent accounts. These effects are long-lived and depreciate slowly after individuals move to more developed areas. Formative exposures to local banking improve consumer credit behavior by increasing financial literacy and financial trust.

Suggested Citation

  • Brown, James R. & Cookson, J. Anthony & Heimer, Rawley Z., 2019. "Growing up without finance," Journal of Financial Economics, Elsevier, vol. 134(3), pages 591-616.
    • Handle: RePEc:eee:jfinec:v:134:y:2019:i:3:p:591-616
    DOI: 10.1016/j.jfineco.2019.05.006
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    More about this item

    Keywords

    Household finance; Native American reservations; Formative exposures; Financial development; Local banking;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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