Self-control and debt: evidence from data on credit counselling
AbstractCounselling agencies assist borrowers in financial difficulties by administering repayment plans, the so-called debt management plans (DMPs).� In this paper, we use unique administrative data from a major credit counselling agency in the UK to analyze the determinants of debt repayment performance of approximately 60,000 borrowers who are enrolled on a DMP.� Employing survival analysis, we estimate that borrowers who smoke and who reported poor financial management as the reason for their repayment difficulties at the enrollment stage are significantly more likely to fail on a DMP even when controlling for a rich set of covariates including monthly DMP payments, income, expenditures, self-reported experiences of negative shocks prior to DMP (illness, job loss, divorce, pregnancy), gender, age, marital status, having a mortgage, and whether the consumer is self or full time employed.� In particular, smoking increases the probability of failing on a DMP by 31 percent and admitting bad financial management increases by 12 percent.� Our findings lend considerable support to the view that self-control considerations play a role in households' indebtedness and consequent repayment difficulties.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 504.
Date of creation: 01 Aug 2010
Date of revision:
Quasi-hyperbolic discounting; Self control; Households' repayment difficulties; Credit counselling; Debt management plans;
Find related papers by JEL classification:
- G2 - Financial Economics - - Financial Institutions and Services
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-18 (All new papers)
- NEP-CBE-2010-09-18 (Cognitive & Behavioural Economics)
- NEP-CFN-2010-09-18 (Corporate Finance)
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- Goode, Jackie, 2012. "Brothers are doing it for themselves?: Men's experiences of getting into and getting out of debt," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 41(3), pages 327-335.
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