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Financial Literacy and Self-employment

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  • Ćumurović, Aida
  • Hyll, Walter

Abstract

In this paper, we study the relationship between financial literacy and self-employment. We use established financial knowledge-based questions to measure financial literacy levels. The analysis shows a highly significant correlation between self-employment and financial literacy scores. To investigate the impact of financial literacy on being self-employed, we apply instrumental variable techniques based on information on economic education before entering the labour market and education of parents. Our results reveal that financial literacy positively affects the probability of being self-employed. As financial literacy is acquirable, findings suggest that entrepreneurial activities may be raised via enhancing financial knowledge.

Suggested Citation

  • Ćumurović, Aida & Hyll, Walter, 2016. "Financial Literacy and Self-employment," IWH Discussion Papers 11/2016, Halle Institute for Economic Research (IWH).
    • Handle: RePEc:zbw:iwhdps:iwh-11-16
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    More about this item

    Keywords

    financial literacy; financial sophistication; self-employment;
    All these keywords.

    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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