Household Debt and Attitudes Toward Risk

22 Pages Posted: 3 May 2013

See all articles by Sarah Brown

Sarah Brown

University of Sheffield - Department of Economics; IZA Institute of Labor Economics

Gaia Garino

University of Leicester - Department of Economics

Karl Taylor

University of Sheffield - Department of Economics

Date Written: June 2013

Abstract

We explore the relationship between attitudes toward risk and the level of debt at the household level for a sample of households drawn from the U.S. Panel Study of Income Dynamics (PSID) over the period 1984 to 2007. Using a sequence of questions from the 1996 PSID, we analyze the implications of interpersonal differences in attitudes toward risk for the accumulation of unsecured debt, secured debt, and total debt at the household level. Our empirical findings suggest that attitudes toward risk are an important determinant of the level of debt acquired at the household level with risk aversion being inversely related to the level of debt accumulated by households.

Keywords: debt, risk attitudes, risk preference

JEL Classification: D12, D14

Suggested Citation

Brown, Sarah and Garino, Gaia and Taylor, Karl B., Household Debt and Attitudes Toward Risk (June 2013). Review of Income and Wealth, Vol. 59, Issue 2, pp. 283-304, 2013. Available at SSRN: https://ssrn.com/abstract=2260093 or http://dx.doi.org/10.1111/j.1475-4991.2012.00506.x

Sarah Brown

University of Sheffield - Department of Economics

9 Mappin Street
Sheffield, S1 4DT
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Gaia Garino

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

Karl B. Taylor

University of Sheffield - Department of Economics ( email )

9 Mappin Street
Sheffield, S1 4DT
United Kingdom

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