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Title: Trust, Consumer Debt, and Household Finance
Resulting in 1 citation.
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Jiang, Danling Lim, Sonya S. |
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Trust, Consumer Debt, and Household Finance Working Paper, Social Science Research Network, June 2013 Cohort(s): NLSY79 Publisher: Social Science Electronic Publishing, Inc. Keyword(s): Debt/Borrowing; Financial Behaviors/Decisions; Trust Permission to reprint the abstract has not been received from the publisher. Using a large sample of U.S. individuals, we show that trust is an important determinant of an array of household financial decisions and outcomes including debt management. Individuals with a higher level of trust are less likely to be in debt, miss payments, file bankruptcy, or go through foreclosure. Their households have lower financial leverage, higher retirement savings and assets, and greater net worth. We show a causal impact of trust on financial outcomes by extracting the component of trust correlated with an individual's early life experiences, and also by purging out the component of trust correlated with prior economic success. The effect of trust channels through the beliefs formed in response to the trustworthiness of people one deals with, as well as through personal values of trust and trustworthiness rooted in the family and cultural background. Trust has a more pronounced effect among females and those who have lower education or income. Our further evidence suggests that enhancing individuals' trust, and to the right amount, can improve household financial well-being. |
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Bibliography Citation
Jiang, Danling and Sonya S. Lim. "Trust, Consumer Debt, and Household Finance." Working Paper, Social Science Research Network, June 2013. |