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

Abstract

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.