Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/203281
Authors: 
Fuchs-Schündeln, Nicola
Haliassos, Michael
Year of Publication: 
2015
Series/Report no.: 
SAFE Working Paper 63
Abstract: 
Household access to financial products is often conditioned on previous use. However, banning access when learning is possible may be discriminatory or counterproductive. The 'experiment' of German reunification (exogenously) offered to East Germans unconditional access to (exogenously) unfamiliar capitalist products. Controlling for characteristics, East Germans participated immediately, were as likely to use unfamiliar risky securities as West Germans, and more likely to use consumer debt, without signs of regret. Our results suggest that mistakes of unfamiliar households can be prevented by a knowledgeable and well-incentivized financial sector and by interaction with familiar peers. This implies that regulation should refocus on the financial sector rather than on prohibiting individuals to gain familiarity with financial products.
Subjects: 
Household finance
familiarity
regulation
investor protection
financialliteracy
stockholding
household debt
consumer credit
social interactions
counterfactual analysis
German reunification
JEL: 
G11
E21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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