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Self-control, financial literacy and consumer over-indebtedness

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  • Gathergood, John

Abstract

This paper examines the relationship between self-control, financial literacy and over-indebtedness on consumer credit debt among UK consumers. Lack of self-control and financial illiteracy are positively associated with non-payment of consumer credit and self-reported excessive financial burdens of debt. Consumers who exhibit self-control problems are shown to make greater use of quick-access but high cost credit items such as store cards and payday loans. We also find consumers with self-control problems are more likely to suffer income shocks, credit withdrawals and unforeseen expenses on durables, suggesting that lack of self-control increases exposure to a variety of risks. In most specifications we find a stronger role for lack of self-control than for financial illiteracy in explaining consumer over-indebtedness. We discuss the policy implications of these findings.

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File URL: http://www.sciencedirect.com/science/article/pii/S0167487011001735
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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Psychology.

Volume (Year): 33 (2012)
Issue (Month): 3 ()
Pages: 590-602

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Handle: RePEc:eee:joepsy:v:33:y:2012:i:3:p:590-602

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Web page: http://www.elsevier.com/locate/joep

Related research

Keywords: Self-control; Financial literacy; Consumer debt;

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Cited by:
  1. John Gathergood & Joerg Weber, 2012. "Self-Control, Financial Literacy and Co-Holding Puzzle," Discussion Papers 2012-02, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  2. Murizah Osman Salleh & Aziz Jaafar & M. Shahid Ebrahim, 2012. "Can an interest-free credit facility be more efficient than a usurious payday loan?," Working Papers 12008, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).

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