Using in-person survey data, we investigate the relationship between the sustainability of household indebtedness and some individual psychological traits. We make use of validated tools in neuroeconomic research to jointly analyse different facets of household psychology, such as impulsiveness, future orientation and attitude toward uncertainty and their effect upon a condition of unsustainable debt. We also condition our model to socio-demographic and economic characteristics of households, as well as on the level of financial literacy and the occurrence of a recent economic distress. The empirical analysis highlights that psychological traits of households have impacts not only on use but also on mis-use of credit. There are three main evidences that need to be pointed out. Firstly, we find that a condition of unsustainable debt occurs more often among individuals who are impulsive, less inclined to plan for the future and less concerned about unexpected events. Secondly, these psychological traits display an effect that is over and beyond the recent occurrence of an economic shock. Finally, financial illiterate individuals are more likely to incur in unsustainable debts, even though the positive effect of financial literacy is not able to completely overcome the detrimental effects of some psychological biases. These results are of particular interest for policy makers in order to define policy measures aimed at providing competencies and tools that can help individuals to manage their resources appropriately and to take sustainable borrowing decisions.

Unsustainable debt: impulsiveness, financial literacy and economic factors

MARINELLI, NICOLETTA
2015-01-01

Abstract

Using in-person survey data, we investigate the relationship between the sustainability of household indebtedness and some individual psychological traits. We make use of validated tools in neuroeconomic research to jointly analyse different facets of household psychology, such as impulsiveness, future orientation and attitude toward uncertainty and their effect upon a condition of unsustainable debt. We also condition our model to socio-demographic and economic characteristics of households, as well as on the level of financial literacy and the occurrence of a recent economic distress. The empirical analysis highlights that psychological traits of households have impacts not only on use but also on mis-use of credit. There are three main evidences that need to be pointed out. Firstly, we find that a condition of unsustainable debt occurs more often among individuals who are impulsive, less inclined to plan for the future and less concerned about unexpected events. Secondly, these psychological traits display an effect that is over and beyond the recent occurrence of an economic shock. Finally, financial illiterate individuals are more likely to incur in unsustainable debts, even though the positive effect of financial literacy is not able to completely overcome the detrimental effects of some psychological biases. These results are of particular interest for policy makers in order to define policy measures aimed at providing competencies and tools that can help individuals to manage their resources appropriately and to take sustainable borrowing decisions.
2015
9788860564641
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11393/232368
 Attenzione

Attenzione! I dati visualizzati non sono stati sottoposti a validazione da parte dell'ateneo

Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact