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Psychology of Debt in Rural South India

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  • Arnaud Natal
  • Christophe Jalil Nordman

Abstract

This study is the first attempt to examine the extent to which the Big Five personality traits and cognitive skills (Raven scores, numeracy, and literacy scores) are correlated with debt negotiation and debt management in a Global South country; and how social identity – in particular caste and gender – channels the effect of cognition on debt outcomes. Using a panel dataset built from an original household survey (called NEEMSIS) conducted in 2016–2017 and 2020–2021 in rural Tamil Nadu, India, and employing multivariate correlation probit analysis with lagged variables, we find the following. Firstly, conscientiousness is an advantage in the negotiation and management of debt, particularly for non-Dalit women, suggesting that, in a rural patriarchal context, women leverage personality traits to overcome the constraints of social identity. Secondly, emotional stability is a disadvantage in both debt negotiation and management. Thirdly, the role of cognition and in particular the Raven score is ambiguous.

Suggested Citation

  • Arnaud Natal & Christophe Jalil Nordman, 2025. "Psychology of Debt in Rural South India," Journal of Development Studies, Taylor & Francis Journals, vol. 61(7), pages 1042-1057, July.
    • Handle: RePEc:taf:jdevst:v:61:y:2025:i:7:p:1042-1057
    DOI: 10.1080/00220388.2025.2451871
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    1. Ashwini Deshpande, 2002. "Assets versus Autonomy? The Changing Face of the Gender-Caste Overlap in India," Feminist Economics, Taylor & Francis Journals, vol. 8(2), pages 19-35.
    2. Isabelle Guérin & Sébastien Michiels & A. Natal & Christophe Jalil Nordman & Govindan Venkatasubramanian, 2022. "Surviving Debt and Survival Debt in Times of Lockdown," Post-Print hal-03707084, HAL.
    3. Sumit Agarwal & Bhashkar Mazumder, 2013. "Cognitive Abilities and Household Financial Decision Making," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 193-207, January.
    4. Jonathan Zinman, 2015. "Household Debt: Facts, Puzzles, Theories, and Policies," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 251-276, August.
    5. C. Badarinza & V. Balasubramaniam & T. Ramadorai, 2019. "The Household Finance Landscape in Emerging Economies," Annual Review of Financial Economics, Annual Reviews, vol. 11(1), pages 109-129, December.
    6. Isabelle Guérin & Sebastien Michiels & Arnaud Natal & Jalil Christophe Nordman & Govindan Venkatasubramanian, 2022. "Surviving Debt and Survival Debt in Times of Lockdown," Post-Print hal-03565131, HAL.
    7. Isabelle Guérin & Sébastien Michiels & Arnaud Natal & Christophe Jalil Nordman & Govindan Venkatasubramanian, 2022. "Surviving debt and survival debt in times of lockdown," Post-Print hal-03509592, HAL.
    8. Isabelle Guérin & Youna Lanos & Sébastien Michiels & Christophe Jalil Nordman & Govindan Venkatasubramanian, 2017. "Insights on Demonetisation from Rural Tamil Nadu: Understanding Social Networks and Social Protection," Post-Print hal-01824464, HAL.
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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