Shawn A. Cole
There are 7 articles for this faculty member.
About Faculty in this Article:
Shawn Cole is an assistant professor in the Finance unit at Harvard Business School.
Barriers to Household Risk Management: Evidence from India
| Authors: | Shawn Cole, Xavier Giné, Jeremy Tobacman, Petia Topalova, Robert Townsend, and James Vickery |
|---|---|
| Published: | May 15, 2009 |
| Paper Release Date: | April 2009 |
| Feature: | Working Papers |
Insurance markets are growing rapidly in developing countries. Despite the promise of these markets, however, adoption to date has been relatively slow. Yet households often remain exposed to movements in local weather; regional house prices; prices of commodities like rice, heating oil, and gasoline; and local, regional, and national income fluctuations. In many cases, financial contracts simply do not exist to hedge these exposures, and when contracts do exist their use is not widespread. Why don't financial markets develop to help households hedge these risks? Why don't more households participate when formal markets are available? HBS professor Shawn Cole and coauthors attempt to shed light on these questions by studying participation in rural India in a rainfall risk-management product that provides a payoff based on monsoon rainfall. The results suggest that it may take a significant amount of time—and substantial marketing efforts—to increase adoption of risk-management tools at the household level.
Money or Knowledge? What Drives Demand for Financial Services in Emerging Markets?
| Authors: | Shawn Cole, Thomas Sampson, and Bilal Zia |
|---|---|
| Published: | May 15, 2009 |
| Paper Release Date: | April 2009 (revised October 2009) |
| Feature: | Working Papers |
Why is there apparently limited demand for financial services in emerging markets? On the one hand, low-income individuals may not want formal services when informal savings, credit, and insurance markets function reasonably well, and the benefits of formal financial market participation may not exceed the costs. On the other hand, limited financial literacy could be the barrier: If people are not familiar or comfortable with products, they will not demand them. These two views carry significantly different implications for the development of financial markets around the world, and would suggest quite different policy decisions by governments and international organizations seeking to promote "financial deepening." HBS professor Shawn Cole and coauthors found that financial literacy education has no effect on the probability of opening a bank savings account for the full population, although it does significantly increase the probability among those with low initial levels of financial literacy and low levels of education. In contrast, modest financial subsidies significantly increase the share of households that open a bank savings account within the subsequent two months.
Smart Money: The Effect of Education, Cognitive Ability, and Financial Literacy on Financial Market Participation
| Authors: | Shawn Cole and Gauri Kartini Shastry |
|---|---|
| Published: | January 14, 2009 |
| Paper Release Date: | December 2008, revised February 2009 |
| Feature: | Working Papers |
(Previously titled "If You Are So Smart, Why Aren't You Rich? The Effects of Education, Financial Literacy and Cognitive Ability on Financial Market Participation.") Individuals face an increasingly complex menu of financial product choices. The shift from defined benefit to defined contribution pension plans, and the growing importance of private retirement accounts, require individuals to choose the amount they save, as well as the mix of assets in which they invest. Yet, participation in financial markets is far from universal in the United States. Moreover, researchers have only a limited understanding of what factors cause participation. Cole and Shastry use a very large dataset new to the literature in order to study the important determinants of financial market participation. They find that higher levels of education and cognitive ability cause increased participation—however, financial literacy education does not.
Published in 2008
Do Voters Appreciate Responsive Governments? Evidence from Indian Disaster Relief
| Authors: | Shawn A. Cole, Andrew Healy, and Eric D. Werker |
|---|---|
| Published: | October 30, 2008 |
| Paper Release Date: | October 2008 |
| Feature: | Working Papers |
In a functioning democracy, politicians' ability to win reelection declines when they perform poorly. This idea fits well with models of political accountability. Recent evidence suggests, however, that voters may punish politicians even for events outside their control. This behavior may violate standard models of democratic accountability, and has been advanced as evidence of voter irrationality. This paper uses detailed weather, electoral, and relief data to identify the relationship between government responsiveness to an emergency and electoral decisions. Specifically, the authors look at the decisions that Indian voters made in provincial elections, using the intensity of the monsoon rains as an exogenous shock to welfare. They find that voters, on average, punish incumbent politicians for being in office during weather events beyond their control. However, the degree of voter punishment is reduced somewhat when the government responds more vigorously to the crisis.
Fixing Market Failures or Fixing Elections? Agricultural Credit in India
| Author: | Shawn A. Cole |
|---|---|
| Published: | August 6, 2008 |
| Paper Release Date: | July 2008 |
| Feature: | Working Papers |
There are strong theoretical reasons to believe that politicians manipulate resources under their control to achieve electoral success. Yet, compelling examples of this manipulation are heretofore rarely documented in scholarly literature. Cole's paper presents evidence that government-owned banks in India serve the electoral interests of politicians. It also analyzes how resources are strategically distributed.
Financial Development, Bank Ownership, and Growth. Or, Does Quantity Imply Quality?
| Author: | Shawn A. Cole |
|---|---|
| Published: | July 22, 2008 |
| Paper Release Date: | July 2008 |
| Feature: | Working Papers |
Government ownership of banks, a common phenomenon, is among the most important policy tools used to influence financial development. But what is the actual effect of such ownership on the financial development of a country? This paper uses a policy experiment in India to evaluate the effect of government ownership of banks on development.
Where Does it Go? Spending by the Financially Constrained
| Authors: | Shawn A. Cole, John Thompson, and Peter Tufano |
|---|---|
| Published: | April 10, 2008 |
| Paper Release Date: | March 2008 |
| Feature: | Working Papers |
Despite widespread interest by academics, businesspeople, and policymakers, much is unknown about the financial behavior of low-income individuals, particularly those who rarely or ever use banks. Do credit constrained consumers spend money more quickly than less constrained consumers? Do they spend the money in different manners (card-based merchant transactions versus cash ATM withdrawals)? Do credit constrained consumers have different spending patterns than the less constrained—do they buy different goods and services? This working paper provides preliminary data on spending patterns by over 1.5 million refund recipients, all of whom used either a loan or a settlement product to receive refund money faster than the IRS processes would have otherwise allowed. The results should inform the view of policymakers, financial service professionals, scholars, and consumer advocates.
