James Li

• James Li, Olivia S. Mitchell, Christina Zhu (Working), Suboptimal Investment and Information-Processing Frictions: Evidence from 529 College Savings Plans. Abstract

  We use the 529 college savings plan setting to investigate whether and why households make suboptimal choices to invest in local assets. We estimate that 67% of open accounts between 2010 and 2020 were located suboptimally, due to the plans’ tax inefficiencies and high expenses. Over the accounts’ projected lifetimes, such investments yielded expected losses of 8% on average, or $13.4 billion in 2020 alone. We then investigate why suboptimal investment is so prevalent. Consistent with households’ lack of understanding of state-level tax benefits, we find that a meaningful proportion of households does not account for the potential tax benefits and costs of local versus nonlocal 529 investment. Household financial literacy and plan disclosure complexity appear to explain suboptimal investment patterns, which further supports the role of information-processing frictions. Our study presents novel evidence on individuals’ preferences for local assets and how information-processing frictions shape their investment decisions, reducing their financial well-being.

  Related
  Links

  NBER Working Paper 30848

Past Courses

• ACCT1010 - Acct & Financial Report

  This course is an introduction to the basic concepts and standards underlying financial accounting systems. Several important concepts will be studied in detail, including: revenue recognition, inventory, long-lived assets, present value, and long term liabilities. The course emphasizes the construction of the basic financial accounting statements - the income statement, balance sheet, and cash flow statement - as well as their interpretation.

Knowledge @ Wharton

• Five Myths About Generative AI That Leaders Should Know, Knowledge @ Wharton - 04/30/2024
• How Bank Depositors Are Becoming More Alert, Knowledge @ Wharton - 04/30/2024
• Is Influencer Marketing Worth It?, Knowledge @ Wharton - 04/29/2024
• Is Influencer Marketing Worth It?, Knowledge @ Wharton - 04/26/2024
• What Is the Role of Customers in the Gig Economy?, Knowledge @ Wharton - 04/25/2024
• Co-hosts of the ‘Gen Z on Gen Z’ Podcast, Knowledge @ Wharton - 04/25/2024
• 2024 NFL Draft, Knowledge @ Wharton - 04/24/2024
• Former Levi’s CEO on Revitalizing a Brand — and the Right Way to Wash Jeans, Knowledge @ Wharton - 04/23/2024
• Why Is Financial Literacy Important? | Olivia S. Mitchell, Knowledge @ Wharton - 04/23/2024
• What Does the Labor Side of Manufacturing Need Over the Next Decade?, Knowledge @ Wharton - 04/23/2024