IDEAS home Printed from https://ideas.repec.org/a/eee/joepsy/v33y2012i1p125-141.html
   My bibliography  Save this article

Who feels constrained by high debt burdens? Subjective vs. objective measures of household debt

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167487011001206
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.joep.2011.08.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gianni Betti & Neil Dourmashkin & Mariacristina Rossi & Ya Ping Yin, 2007. "Consumer over‐indebtedness in the EU: measurement and characteristics," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 34(2), pages 136-156, May.
    2. Paul W. Grimes & Meghan J. Millea & Thomas W. Woodruff, 2004. "Grades—Who's to Blame? Student Evaluation of Teaching and Locus of Control," The Journal of Economic Education, Taylor & Francis Journals, vol. 35(2), pages 129-147, April.
    3. Giuseppe Bertola & Richard Disney & Charles Grant (ed.), 2006. "The Economics of Consumer Credit," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262026015, April.
    4. Sydney C. Ludvigson, 2004. "Consumer Confidence and Consumer Spending," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 29-50, Spring.
    5. Tokunaga, Howard, 1993. "The use and abuse of consumer credit: Application of psychological theory and research," Journal of Economic Psychology, Elsevier, vol. 14(2), pages 285-316, June.
    6. Stone, Brice & Maury, Rosalinda Vasquez, 2006. "Indicators of personal financial debt using a multi-disciplinary behavioral model," Journal of Economic Psychology, Elsevier, vol. 27(4), pages 543-556, August.
    7. Alan Manning & Joanna Swaffield, 2008. "The gender gap in early-career wage growth," Economic Journal, Royal Economic Society, vol. 118(530), pages 983-1024, July.
    8. Brown, Sarah & Taylor, Karl & Wheatley Price, Stephen, 2005. "Debt and distress: Evaluating the psychological cost of credit," Journal of Economic Psychology, Elsevier, vol. 26(5), pages 642-663, October.
    9. Prince, Melvin, 1993. "Women, men and money styles," Journal of Economic Psychology, Elsevier, vol. 14(1), pages 175-182, March.
    10. David B. Gross & Nicholas S. Souleles, 2002. "Do Liquidity Constraints and Interest Rates Matter for Consumer Behavior? Evidence from Credit Card Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 149-185.
    11. John Bound, 1991. "Self-Reported Versus Objective Measures of Health in Retirement Models," Journal of Human Resources, University of Wisconsin Press, vol. 26(1), pages 106-138.
    12. Deborah Thorne, 2010. "Extreme Financial Strain: Emergent Chores, Gender Inequality and Emotional Distress," Journal of Family and Economic Issues, Springer, vol. 31(2), pages 185-197, June.
    13. Heineck, Guido & Anger, Silke, 2010. "The returns to cognitive abilities and personality traits in Germany," Labour Economics, Elsevier, vol. 17(3), pages 535-546, June.
    14. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    15. Sarah Bridges & Richard Disney, 2004. "Use of credit and arrears on debt among low-income families in the United Kingdom," Fiscal Studies, Institute for Fiscal Studies, vol. 25(1), pages 1-25, March.
    16. Margo Coleman & Thomas DeLeire, 2003. "An Economic Model of Locus of Control and the Human Capital Investment Decision," Journal of Human Resources, University of Wisconsin Press, vol. 38(3).
    17. Sarah Brown & Gaia Garino & Karl Taylor & Stephen Wheatley Price, 2005. "Debt and Financial Expectations: An Individual- and Household-Level Analysis," Economic Inquiry, Western Economic Association International, vol. 43(1), pages 100-120, January.
    18. Guillaume R. Frechette, 2001. "Update to random-effects ordered probit," Stata Technical Bulletin, StataCorp LP, vol. 10(61).
    19. Jianakoplos, Nancy Ammon & Bernasek, Alexandra, 1998. "Are Women More Risk Averse?," Economic Inquiry, Western Economic Association International, vol. 36(4), pages 620-630, October.
    20. Goldsmith, Arthur H & Veum, Jonathan R & Darity, William, Jr, 1997. "The Impact of Psychological and Human Capital on Wages," Economic Inquiry, Western Economic Association International, vol. 35(4), pages 815-829, October.
    21. DeVaney, Sharon A. & Lytton, Ruth H., 1995. "Household insolvency: A review of household debt repayment, delinquency, and bankruptcy," Financial Services Review, Elsevier, vol. 4(2), pages 137-156.
    22. Groves, Melissa Osborne, 2005. "How important is your personality? Labor market returns to personality for women in the US and UK," Journal of Economic Psychology, Elsevier, vol. 26(6), pages 827-841, December.
    23. John B. Carlin & John C. Galati & Patrick Royston, 2008. "A new framework for managing and analyzing multiply imputed data in Stata," Stata Journal, StataCorp LP, vol. 8(1), pages 49-67, February.
    24. Krause, Neal & Stryker, Sheldon, 1984. "Stress and well-being: The buffering role of locus of control beliefs," Social Science & Medicine, Elsevier, vol. 18(9), pages 783-790, January.
    25. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 411-482, July.
    26. Nicole M. Fortin, 2008. "The Gender Wage Gap among Young Adults in the United States: The Importance of Money versus People," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
    27. Lea, Stephen E. G. & Webley, Paul & Levine, R. Mark, 1993. "The economic psychology of consumer debt," Journal of Economic Psychology, Elsevier, vol. 14(1), pages 85-119, March.
    28. Christa Fricke & Detlev Österreich & Eva Schulze & Gert G. Wagner, 2007. "Überschuldung ist ein Problem fehlender Netzwerke," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 74(7), pages 95-100.
    29. Guillaume R. Frechette, 2001. "Random-effects ordered probit," Stata Technical Bulletin, StataCorp LP, vol. 10(59).
    30. Verme, Paolo, 2009. "Happiness, freedom and control," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 146-161, August.
    31. Lea, Stephen E. G. & Webley, Paul & Walker, Catherine M., 1995. "Psychological factors in consumer debt: Money management, economic socialization, and credit use," Journal of Economic Psychology, Elsevier, vol. 16(4), pages 681-701, December.
    32. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
    33. Livingstone, Sonia M. & Lunt, Peter K., 1992. "Predicting personal debt and debt repayment: Psychological, social and economic determinants," Journal of Economic Psychology, Elsevier, vol. 13(1), pages 111-134, March.
    34. Lindeboom, Maarten & van Doorslaer, Eddy, 2004. "Cut-point shift and index shift in self-reported health," Journal of Health Economics, Elsevier, vol. 23(6), pages 1083-1099, November.
    35. Rachel Croson & Uri Gneezy, 2009. "Gender Differences in Preferences," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 448-474, June.
    36. Abeele, P. Vanden, 1983. "The index of consumer sentiment: Predictability and predictive power in the EEC," Journal of Economic Psychology, Elsevier, vol. 3(1), pages 1-17.
    37. Powell, Melanie & Ansic, David, 1997. "Gender differences in risk behaviour in financial decision-making: An experimental analysis," Journal of Economic Psychology, Elsevier, vol. 18(6), pages 605-628, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:zbw:rwirep:0169 is not listed on IDEAS
    2. Matthias Keese, 2010. "Who Feels Constrained by High Debt Burdens? – Subjective vs. Objective Measures of Household Indebtedness," Ruhr Economic Papers 0169, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    3. Keese, Matthias, 2010. "Who Feels Constrained by High Debt Burdens? – Subjective vs. Objective Measures of Household Indebtedness," Ruhr Economic Papers 169, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    4. Mewse, Avril J. & Lea, Stephen E.G. & Wrapson, Wendy, 2010. "First steps out of debt: Attitudes and social identity as predictors of contact by debtors with creditors," Journal of Economic Psychology, Elsevier, vol. 31(6), pages 1021-1034, December.
    5. Schicks, Jessica, 2014. "Over-Indebtedness in Microfinance – An Empirical Analysis of Related Factors on the Borrower Level," World Development, Elsevier, vol. 54(C), pages 301-324.
    6. Nils Braakmann, 2009. "The Role of Psychological Traits for the Gender Gap in Full-Time Employment and Wages: Evidence from Germany," SOEPpapers on Multidisciplinary Panel Data Research 162, DIW Berlin, The German Socio-Economic Panel (SOEP).
    7. Bernadette Kamleitner & Bianca Hornung & Erich Kirchler, 2010. "Over-indebtedness and the interplay of factual and mental money management: An interview study," Working Papers 34, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    8. Tomasz Korol, 2021. "Evaluation of the Macro- and Micro-Economic Factors Affecting the Financial Energy of Households," Energies, MDPI, vol. 14(12), pages 1-14, June.
    9. Stefano Cosma & Francesco Pattarin, 2012. "Attitudes, personality factors and household debt decisions: A study of consumer credit," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 12021, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    10. Cesar Leandro, Julio & Botelho, Delane, 2022. "Consumer over-indebtedness: A review and future research agenda," Journal of Business Research, Elsevier, vol. 145(C), pages 535-551.
    11. Chen, Weiwei & Grove, Wayne A. & Hussey, Andrew, 2017. "The role of confidence and noncognitive skills for post-baccalaureate academic and labor market outcomes," Journal of Economic Behavior & Organization, Elsevier, vol. 138(C), pages 10-29.
    12. Leonora Risse & Lisa Farrell & Tim R L Fry, 2018. "Personality and pay: do gender gaps in confidence explain gender gaps in wages?," Oxford Economic Papers, Oxford University Press, vol. 70(4), pages 919-949.
    13. Antoine Marsaudon, 2022. "Do Hospital Stays Modify Locus of Control?," De Economist, Springer, vol. 170(2), pages 257-277, May.
    14. Keese, Matthias, 2009. "Triggers and Determinants of Severe Household Indebtedness in Germany," Ruhr Economic Papers 150, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    15. Wang, Lili & Lu, Wei & Malhotra, Naresh K., 2011. "Demographics, attitude, personality and credit card features correlate with credit card debt: A view from China," Journal of Economic Psychology, Elsevier, vol. 32(1), pages 179-193, February.
    16. Stefano Cosma & Francesco Pattarin, 2012. "Attitudes, personality factors and household debt decisions: A study of consumer credit," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0031, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    17. Matthias Keese, 2009. "Triggers and Determinants of Severe Household Indebtedness in Germany," SOEPpapers on Multidisciplinary Panel Data Research 239, DIW Berlin, The German Socio-Economic Panel (SOEP).
    18. Thiel, Hendrik & Thomsen, Stephan L., 2013. "Noncognitive skills in economics: Models, measurement, and empirical evidence," Research in Economics, Elsevier, vol. 67(2), pages 189-214.
    19. Humphries, John Eric & Kosse, Fabian, 2017. "On the interpretation of non-cognitive skills – What is being measured and why it matters," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 174-185.
    20. Eva M. Berger & Luke Haywood, 2016. "Locus of Control and Mothers’ Return to Employment," Journal of Human Capital, University of Chicago Press, vol. 10(4), pages 442-481.
    21. Deborah Cobb-Clark, 2015. "Locus of control and the labor market," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-19, December.

    More about this item

    Keywords

    Household debt; Subjective measures; Locus of control; Risk aversion; Gender differences;
    All these keywords.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:joepsy:v:33:y:2012:i:1:p:125-141. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/joep .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.