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

Author

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  • Kristoffer Balle Hvidberg

    (CEBI, University of Copenhagen)

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' income.

Suggested Citation

  • Kristoffer Balle Hvidberg, 2023. "Field of Study and Financial Problems: How Economics Reduces the Risk of Default," CEBI working paper series 21-12, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    • Handle: RePEc:kud:kucebi:2112
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    File URL: https://www.econ.ku.dk/cebi/publikationer/working-papers/CEBI_WP_12-21.Rev.1.pdf
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    Citations

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    Cited by:

    1. Lusardi, Annamaria & Kaiser, Tim, 2024. "Financial literacy and financial education: An overview," CEPR Discussion Papers 19185, C.E.P.R. Discussion Papers.
    2. d'Astous, Philippe & Shore, Stephen H., 2024. "Human capital risk and portfolio choices: Evidence from university admission discontinuities," Journal of Financial Economics, Elsevier, vol. 154(C).
    3. Altmejd, Adam & Jansson, Thomas & Karabulut, Yigitcan, 2024. "Business Education and Portfolio Returns," IZA Discussion Papers 16976, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    Financial Problems; Education; Regression Discontinuity; Financial Literacy;
    All these keywords.

    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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