Non-Cognitive Abilities and Financial Delinquency: The Role of Self-Efficacy in Avoiding Financial Distress
48 Pages Posted: 1 Dec 2016 Last revised: 26 Apr 2018
Date Written: December 31, 2017
We investigate a novel determinant of financial distress, namely individuals' self-efficacy, or belief that their actions can influence the future. Individuals with high self-efficacy are more likely to take precautions that mitigate adverse financial shocks. They are subsequently less likely to default on their debt and bill payments, especially after experiencing negative shocks such as job loss or illness. Thus, non-cognitive abilities are an important determinant of financial fragility and subjective expectations are an important factor in household financial decisions.
Keywords: household finance, financial distress, self-efficacy, subjective expectations, non-cognitive skills
JEL Classification: D14, D84, D91, G02
Suggested Citation: Suggested Citation