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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.

Suggested Citation

  • 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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    Cited by:

    1. Meniago, Christelle & Mukuddem-Petersen, Janine & Petersen, Mark A. & Mongale, Itumeleng P., 2013. "What causes household debt to increase in South Africa?," Economic Modelling, Elsevier, vol. 33(C), pages 482-492.
    2. Daniel Gray, 2014. "Financial Concerns and Overall Life Satisfaction: A Joint Modelling Approach," Working Papers 2014008, The University of Sheffield, Department of Economics.
    3. Philip Du Caju & François Rycx & Ilan Tojerow, 2015. "Unemployment Risk and Over-indebtedness A Micro-econometric Perspective," Working Papers CEB 15-046, ULB -- Universite Libre de Bruxelles.
    4. Piotr Bialowolski & Dorota Weziak-Bialowolska, 2014. "The Index of Household Financial Condition, Combining Subjective and Objective Indicators: An Appraisal of Italian Households," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 118(1), pages 365-385, August.
    5. Du Caju, Philip & Rycx, François & Tojerow, Ilan, 2016. "Unemployment risk and over-indebtedness," Working Paper Series 1908, European Central Bank.
    6. Tufan Ekici, 2016. "Subjective Financial Distress in the Formation of Consumer Confidence: Evidence from Novel Household Data," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 30(2), pages 11-36.
    7. Mary Eschelbach Hansen & Julie Routzahn, 2014. "Gender Differences in Attitudes Toward Debt and Financial Position: The Impact of the Great Recession," Working Papers 2014-10, American University, Department of Economics.
    8. Atte Oksanen & Mikko Aaltonen & Kati Rantala, 2015. "Social Determinants of Debt Problems in a Nordic Welfare State: a Finnish Register-Based Study," Journal of Consumer Policy, Springer, vol. 38(3), pages 229-246, September.

    More about this item

    Keywords

    Household debt; Subjective measures; Locus of control; Risk aversion; Gender differences;

    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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