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Field of Study and Financial Problems: How Economics Reduces the Risk of Default

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  • Kristoffer Balle
  • Tarun Ramadorai

Abstract

This paper documents how extensive economic education can reduce the risk of getting into financial trouble by comparing people who enter business and economics programs with people who enter other higher education programs. To identify the causal effect, I exploit GPA admission thresholds that quasi-randomize applicants near the thresholds into different higher education programs. I find that admission to an economics program reduces the probability of loan default and delinquency by one half. This large reduction is associated with changes in financial behavior, but it is not associated with differences in the level or stability of people’s income.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Kristoffer Balle & Tarun Ramadorai, 2023. "Field of Study and Financial Problems: How Economics Reduces the Risk of Default," The Review of Financial Studies, Society for Financial Studies, vol. 36(11), pages 4677-4711.
    • Handle: RePEc:oup:rfinst:v:36:y:2023:i:11:p:4677-4711.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhad034
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    More about this item

    JEL classification:

    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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