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The relationship between household debt and the Big Five personality traits

Author

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  • Lee, Taehyun
  • Heshmati, Almas

Abstract

This study investigates the relationship between household debt and the Big Five personality traits using data from the Korea Labor and Income Panel Study. The extensive and intensive margins of debt participation are analyzed through regression analysis. To address potential sample selection bias from non-random missing data, a Heckman selection model is employed. The results indicate that openness is negatively associated with the probability of debt-holding, while conscientiousness is positively associated. To enhance causal interpretation, panel models are additionally estimated, treating personality traits as predetermined. While personality traits do not significantly predict year-on-year changes in debt amounts, they remain a relevant predictor of debt participation. These findings suggest that personality-based financial profiling may help identify households more prone to incurring debt. The results are interpreted in the light of South Korea’s cultural context, particularly the influence of Chemyeon (social face), and compared with findings from Western societies.

Suggested Citation

  • Lee, Taehyun & Heshmati, Almas, 2025. "The relationship between household debt and the Big Five personality traits," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 119(C).
    • Handle: RePEc:eee:soceco:v:119:y:2025:i:c:s2214804325001326
    DOI: 10.1016/j.socec.2025.102468
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    JEL classification:

    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • N35 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Asia including Middle East

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