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Financial capability and psychological health

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  • Taylor, Mark P.
  • Jenkins, Stephen P.
  • Sacker, Amanda

Abstract

Financial capability is receiving increasing interest among policy makers, who wish to reduce problem debt and welfare dependency and increase savings and general skills. We examine whether financial capability has impacts on psychological health independent of income and financial resources more generally using a nationally representative survey. Data from the British Household Panel Survey 1991–2006 are used to construct a measure of financial capability, which we relate to respondents’ psychological health using the 12-item General Health Questionnaire. Estimates from within-group panel data models indicate that financial capability has significant and substantial effects on psychological health over and above those associated with income and material wellbeing more generally. For men, having low financial capability has an effect larger than that associated with being unemployed, while for women it is similar to that of being divorced. Furthermore having low financial capability exacerbates the psychological costs associated with unemployment and divorce, while high financial capability reduces these costs.

Suggested Citation

  • Taylor, Mark P. & Jenkins, Stephen P. & Sacker, Amanda, 2011. "Financial capability and psychological health," Journal of Economic Psychology, Elsevier, vol. 32(5), pages 710-723.
  • Handle: RePEc:eee:joepsy:v:32:y:2011:i:5:p:710-723 DOI: 10.1016/j.joep.2011.05.006
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    References listed on IDEAS

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    1. repec:eee:jeborg:v:142:y:2017:i:c:p:404-424 is not listed on IDEAS
    2. Guven, Cahit, 2012. "Reversing the question: Does happiness affect consumption and savings behavior?," Journal of Economic Psychology, Elsevier, pages 701-717.
    3. Alex Bryson & Michael White, 2016. "Not so dissatisfied after all? The impact of union coverage on job satisfaction," Oxford Economic Papers, Oxford University Press, vol. 68(4), pages 898-919.
    4. Ayllón, Sara & Fusco, Alessio, 2017. "Are income poverty and perceptions of financial difficulties dynamically interrelated?," Journal of Economic Psychology, Elsevier, pages 103-114.
    5. Bryce L. Jorgensen & Diane Foster & Jakob F. Jensen & Elisabete Vieira, 2017. "Financial Attitudes and Responsible Spending Behavior of Emerging Adults: Does Geographic Location Matter?," Journal of Family and Economic Issues, Springer, vol. 38(1), pages 70-83, March.
    6. Dennis, Charles & Alamanos, Eleftherios & Papagiannidis, Savvas & Bourlakis, Michael, 2016. "Does social exclusion influence multiple channel use? The interconnections with community, happiness, and well-being," Journal of Business Research, Elsevier, vol. 69(3), pages 1061-1070.
    7. Giuseppe Arcangelis & Majlinda Joxhe, 2015. "How do migrants save? Evidence from the British Household Panel Survey on temporary and permanent migrants versus natives," IZA Journal of Migration, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-23, December.
    8. Reeves, Aaron & McKee, Martin & Mackenbach, Johan & Whitehead, Margaret & Stuckler, David, 2017. "Introduction of a national minimum wage reduceddepressive symptoms in low-wage workers:a quasi-natural experiment in the UK," LSE Research Online Documents on Economics 66485, London School of Economics and Political Science, LSE Library.
    9. Maria Mercedes Teijeiro Álvarez (ed.), 2013. "Investigaciones de Economía de la Educación," E-books Investigaciones de Economía de la Educación, Asociación de Economía de la Educación, edition 1, volume 8, number 08, September.
    10. Brown, Sarah & Ghosh, Pulak & Taylor, Karl, 2014. "The existence and persistence of household financial hardship: A Bayesian multivariate dynamic logit framework," Journal of Banking & Finance, Elsevier, vol. 46(C), pages 285-298.

    More about this item

    Keywords

    Financial capability; Psychological health; Wellbeing; Panel data; BHPS;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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