This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Debt and Risk Preference: A Household Level Analysis

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Sarah Brown ()
Gaia Garino
Peter Simmons
Karl Taylor () (Department of Economics, The University of Sheffield)

Additional information is available for the following registered author(s):

Abstract

We explore the relationship between risk preference and the level of unsecured debt at the household level within the context of a two period theoretical framework, which predicts that debt is a function of risk aversion. We test the predictions of our theoretical framework for a sample of households drawn from the U.S. Panel Study of Income Dynamics (PSID) and the U.S. Survey of Consumer Finances (SCF). Using a sequence of questions from the 1996 PSID and the 1989 to 2004 SCF, we construct measures of risk preference allowing us to explore the implications of interpersonal differences in risk preference for the accumulation of unsecured debt at the household level. Our empirical findings, which accord with our theoretical priors, suggest that risk preference is an important determinant of the level of unsecured debt acquired at the household level with risk aversion serving to reduce the level of unsecured debt accumulated by households.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.shef.ac.uk/content/1/c6/08/38/04/SERP2008005.pdf
File Format: application/pdf
File Function: First version, 2008
Download Restriction: no
File URL: http://www.shef.ac.uk/content/1/c6/08/38/04/SERP2008005.pdf
File Format: application/pdf
File Function: Revised version, 2008
Download Restriction: no

Publisher Info
Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2008005.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 32 pages
Date of creation: Apr 2008
Date of revision: Apr 2008
Handle: RePEc:shf:wpaper:2008005

Contact details of provider:
Postal: 9 Mappin Street, SHEFFIELD, S1 4DT
Phone: +44 114 222 3399
Fax: + 44 (0)114 222 3458
Email:
Web page: http://www.shef.ac.uk/economics
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Joanne Lindley).

Related research
Keywords: Debt; Financial Assets; Risk Aversion; Risk Preference;

Find related papers by JEL classification:
D18 - Microeconomics - - Household Behavior - - - Consumer Protection
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & Jose-Victor Rios-Rull, 2007. "A quantitative theory of unsecured consumer credit with risk of default," Working Papers 07-16, Federal Reserve Bank of Philadelphia. [Downloadable!]
    Other versions:
  3. Gropp, Reint & Scholz, John Karl & White, Michelle J, 1997. "Personal Bankruptcy and Credit Supply and Demand," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 217-51, February.
    Other versions:
  4. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S164-S187, February. [Downloadable!] (restricted)
  5. Luigi Guiso & Tullio Jappelli, 2000. "Household Portfolios in Italy," CSEF Working Papers 43, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
    Other versions:
  6. Donkers, Bas & van Soest, Arthur, 1999. "Subjective measures of household preferences and financial decisions," Journal of Economic Psychology, Elsevier, vol. 20(6), pages 613-642, December. [Downloadable!] (restricted)
  7. Shaw, Kathryn L, 1996. "An Empirical Analysis of Risk Aversion and Income Growth," Journal of Labor Economics, University of Chicago Press, vol. 14(4), pages 626-53, October. [Downloadable!] (restricted)
  8. Sarah Brown & Gaia Garino & Karl Taylor & Stephen Wheatley Price, 2005. "Debt and Financial Expectations: An Individual- and Household-Level Analysis," Economic Inquiry, Oxford University Press, vol. 43(1), pages 100-120, January. [Downloadable!] (restricted)
    Other versions:
  9. Benhabib, Jess & Bisin, Alberto, 2005. "Modeling internal commitment mechanisms and self-control: A neuroeconomics approach to consumption-saving decisions," Games and Economic Behavior, Elsevier, vol. 52(2), pages 460-492, August. [Downloadable!] (restricted)
  10. Thaler, Richard H & Shefrin, H M, 1981. "An Economic Theory of Self-Control," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 392-406, April. [Downloadable!] (restricted)
    Other versions:
  11. Crook, Jonathan, 2001. "The Demand for Household Debt in the USA: Evidence from the 1995 Survey of Consumer Finance," Applied Financial Economics, Taylor and Francis Journals, vol. 11(1), pages 83-91, February. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? The RePEc project started in 1997. Its precursor, NetEc, dates back to 1993.

This page was last updated on 2009-11-1.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.