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Who feels constrained by high debt burdens? Subjective vs. objective measures of household debt

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  • Keese, Matthias

Abstract

I analyze differences in debt perception of households confronted with an objective debt burden. Using data from the German Socio-Economic Panel, my econometric analysis shows that a subjective debt burden is not only influenced by the current constellation of income, debt service and, possibly, the potential subsistence level. Expectations of the personal economic situation and several non-financial factors affect debt perception as well. Women report significantly higher subjective debt burdens. Unemployment is also associated with drastically higher self-assessed debt burdens even when controlling for the current financial situation and for expectations. Some differences in the subjective perception of objective debt burdens can be attributed to personality traits (such as locus of control) and life satisfaction. I draw the following conclusions: First, self-assessed debt burdens contain information beyond the current economic situation, e.g., expectations of future incomes. Second, relying on subjective debt statements can lead to biased results for policy analysis if the researcher does not account for non-financial factors.

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  • Keese, Matthias, 2012. "Who feels constrained by high debt burdens? Subjective vs. objective measures of household debt," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 125-141.
    • Handle: RePEc:eee:joepsy:v:33:y:2012:i:1:p:125-141
    DOI: 10.1016/j.joep.2011.08.002
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    More about this item

    Keywords

    Household debt; Subjective measures; Locus of control; Risk aversion; Gender differences;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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