Teachers Teaching Teachers: The Role of Networks on Financial Decisions

Abstract:

This paper studies the role of peers in the transmission of information pertinent to household financial decisions. Specifically, we examine the effect of peers on the mortgage refinancing decisions of school teachers in Texas by exploiting commonalities in teacher schedules to identify peer groups. Using this source of within-campus variation to separate campus-level unobservable shocks, we find that refinancing activity among a teacher’s peers increases her likelihood of refinancing by 9.5%. Peers also affect a teacher’s choice of lender. Overall, our findings suggest that a household’s cost of acquiring and processing financial information is greatly reduced by interacting with peers.