Self-Control, Financial Literacy and Consumer Over-Indebtedness

By John Gathergood. 2012

683 citations recorded by the source corpus.

This paper examines the relationship between self-control, financial literacy and over-indebtedness on consumer credit debt among UK consumers. Lack of self-control and financial illiteracy are positively associated with non-payment of consumer credit and self-reported excessive financial burdens of debt. Consumers who exhibit self-control problems are shown to make greater use of quick-access but high cost credit items such as store cards and payday loans. We also find consumers with self-control problems are more likely to suffer income shocks, credit withdrawals and unforeseen expenses on durables, suggesting that lack of self-control increases exposure to a variety of risks. In most specifications we find a stronger role for lack of self-control than for financial illiteracy in explaining consumer over-indebtedness. We discuss the policy implications of these findings.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/43efc0fa2f2e04aac7c9d8784afa6e3f58784c4e

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Citations in the corpus

Personality and Young Adult Financial Distress (2015, background): “financial management requires one to formulate and implement a financial plan (Yao and Xu, 2014), resist temptation (Gathergood, 2012; Gul and Pesendorfer, 2004; Thaler and Shefrin, 1981), and deal with social comparison (K.”
Financial Literacy and Retirement Planning in Switzerland (2013, background): “Our survey elicited measures of risk aversion and time preferences which have been shown to be correlated with financial literacy and financial behavior https://scholarcommons.usf.edu/numeracy/vol6/iss2/art6 DOI: http://dx.doi.org/10.5038/1936-4660.6.2.6 (Gathergood 2012; McCarthy 2011).”
Financial literacy and over-indebtedness in low-income households (2016, background): “4 Additionally, the literature finds that those with superior financial literacy have higher household incomes and savings ( Disney and Gathergood, 2012).”
Debt out of control: The links between self-control, compulsive buying, and real debts (2015, background): “…that exclusively focused on the control of spending or buying behavior (e.g., “I am prepared to spend now and let the future take care of itself”; Gathergood, 2012, p. 595) and hence measured self-control for highly specific domains, but not as a general trait that influences behavior across…”
The rise of digital finance: Financial inclusion or debt trap? (2021, background): “…classification (Allen et al., 2016; Jack and Suri, 2014; Li et al., 2020), consumption (Jack and Suri, 2014; Li et al., 2020), existence of unpaid loans (Samaratunge et al., 2020) to proxy for access to credit markets, and self-reported financial distress (Gathergood, 2012) to proxy for debt trap.”
Financial literacy, financial advice, and financial behavior (2017, methodology): “While some studies measure financial literacy using simple indicator variables (Jappelli 2010; Gathergood 2012), several other authors rely on more advanced techniques such as principal component analysis (e.g. Behrmann et al. 2012; Klapper et al. 2013; Lusardi et al. 2014), iterated principal…”
Childhood Roots of Financial Literacy (2015, background): “A number of studies link financial literacy with different aspects of personality such as self-control or (low) time preference (Gathergood, 2012, Dick and Jarozek, 2013, Meier and Sprenger, 2013, Fernandes et al., 2014).”
Consumer resistance and inertia of retail investors: Development of the resistance adoption inertia continuance (RAIC) framework (2020, neutral): “Third, because the prices of financial products fluctuate from time to time, asset markets need regulation to prevent crashes and bubbles (Agnew and Szykman, 2008; Anderson et al., 2018; Gathergood, 2012; Afik and Lahav, 2015; Kim et al., 2016).”
Financial Literacy, Present Bias and Alternative Mortgage Products (2017, neutral): “This question proxies self-control issues in the sense of ‘present bias’, which we also use 13 in Gathergood (2012) and Gathergood & Weber (2014).”
Financial literacy and financial behavior: Evidence from the emerging Asian middle class (2018, neutral): “They have less high-cost consumer credit (Disney and Gathergood, 2013) and fewer problems with repaying credit card debt (Gathergood, 2012).”