IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp17482.html
   My bibliography  Save this paper

Psychology of Debt in Rural South India

Author

Listed:
  • Natal, Arnaud

    (University of Bordeaux)

  • Nordman, Christophe Jalil

    (IRD, DIAL, Paris-Dauphine)

Abstract

The relationship between personal debt and cognition has received limited attention, especially, in developing countries. This study focuses on India and examines the relationship between Big Five personality traits, cognitive skills (math, literacy, and Raven scores), and financial decision-making, specifically debt negotiation and debt management, while considering the weight of social identity (i.e., caste and gender). Using a panel dataset built from an original household survey conducted in 2016-17 and 2020-21 in rural Tamil Nadu and employing multivariate correlation probit analysis, 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 (negative correlation with debt negotiation but positive correlation with debt management). Our results suggest that training programmes designed to improve conscientiousness, when integrated into broader macroeconomic policies, could help individuals secure better loan conditions and avoid repayment difficulties.

Suggested Citation

  • Natal, Arnaud & Nordman, Christophe Jalil, 2024. "Psychology of Debt in Rural South India," IZA Discussion Papers 17482, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17482
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp17482.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    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. Jonathan Zinman, 2015. "Household Debt: Facts, Puzzles, Theories, and Policies," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 251-276, August.
    4. 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.
    5. 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.
    6. 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.
    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. Isabelle Guérin & Cécile Mouchel & Christophe Jalil Nordman, 2023. "With a Little Help from My Friends? Surviving the Lockdown Using Social Networks in Rural South India," Working Papers DT/2023/02, DIAL (Développement, Institutions et Mondialisation).
    2. Smriti Rao & Kade Finnoff, 2015. "Marriage Migration and Inequality in India, 1983–2008," Population and Development Review, The Population Council, Inc., vol. 41(3), pages 485-505, September.
    3. Baker, Scott R. & Johnson, Stephanie & Kueng, Lorenz, 2024. "Financial returns to household inventory management," Journal of Financial Economics, Elsevier, vol. 151(C).
    4. Moumita Poddar Rana & Tanmoyee Banerjee (Chatterjee) & Ajitava Raychaudhuri, 2023. "Religious And Social Group Diversity In Borrowing And Spending Behaviour: Analysis Of Survey Results From Rural West Bengal, India," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 68(236), pages 51-79, January –.
    5. Engelbert Stockhammer & Erik Bengtsson, 2020. "Financial effects in historic consumption and investment functions," International Review of Applied Economics, Taylor & Francis Journals, vol. 34(3), pages 304-326, May.
    6. Deshpande, Ashwini & Kabeer, Naila, 2024. "Norms that matter: Exploring the distribution of women’s work between income generation, expenditure-saving and unpaid domestic responsibilities in India," World Development, Elsevier, vol. 174(C).
    7. Reboul, E. & Guérin, I. & Nordman, C.J., 2021. "The gender of debt and credit: Insights from rural Tamil Nadu," World Development, Elsevier, vol. 142(C).
    8. Dimitris Christelis & Michael Ehrmann & Dimitris Georgarakos, 2021. "Exploring Differences in Household Debt across the United States and Euro Area Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(2-3), pages 477-501, March.
    9. Wenhua Di & Yichen Su, 2021. "Conspicuous Consumption: Vehicle Purchases by Non-Prime Consumers," Working Papers 2107, Federal Reserve Bank of Dallas.
    10. Sharmistha Self & Richard Grabowski, 2013. "Female Autonomy In Rural North India: Impact Of Economic, Social, And Political Factors," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 38(1), pages 59-82, March.
    11. Antonia Grohmann & Jana Hamdan, 2021. "The Effect of Self-Control and Financial Literacy on Impulse Borrowing: Experimental Evidence," Discussion Papers of DIW Berlin 1950, DIW Berlin, German Institute for Economic Research.
    12. Ashwini Deshpande & Naila Kabeer, 2021. "Norms that matter: Exploring the distribution of women's work between income generation, expenditure-saving, and unpaid domestic responsibilities in India," WIDER Working Paper Series wp-2021-130, World Institute for Development Economic Research (UNU-WIDER).
    13. Styhre Alexander, 2018. "The Making of the Shareholder Primacy Governance Model: Price Theory, the Law and Economics School, and Corporate Law Retrenchment Advocacy," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 8(3), pages 1-31, December.
    14. Piotr Bolibok, 2018. "The Macroeconomic Drivers Of Household Debt-To-Income Ratio: An Evidence Frome The Oecd Countries," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 7(2), pages 29-41.
    15. Natalie Cox, 2017. "Pricing, Selection, and Welfare in the Student Loan Market: Evidence from Borrower Repayment Decisions," Working Papers 2017-2, Princeton University. Economics Department..
    16. Edouard Ribes, 2023. "The need for data products in personal finance," Working Papers hal-04015599, HAL.
    17. Trenita B. Childers & Kevin Chiou, 2016. "Socioeconomic Status, Religion and Health in India: an Examination of Chronic and Communicable Diseases," The Review of Black Political Economy, Springer;National Economic Association, vol. 43(2), pages 149-164, June.
    18. Bhutta, Neil & Ringo, Daniel, 2021. "The effect of interest rates on home buying: Evidence from a shock to mortgage insurance premiums," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 195-211.
    19. Jumrani, J. & Birthal, P.S., 2015. "Livestock, Women, and Child Nutrition in Rural India," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 28(2).
    20. D'Orazio, Paola, 2019. "Income inequality, consumer debt, and prudential regulation: An agent-based approach to study the emergence of crises and financial instability," Economic Modelling, Elsevier, vol. 82(C), pages 308-331.

    More about this item

    Keywords

    caste; Big Five; personality traits; cognitive skills; gender; social identity;
    All these keywords.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:iza:izadps:dp17482. 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: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    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.