Essays on debt aversion
Abstract/Contents
- Abstract
- We propose that holding debt causes worse financial decisions using two novel experimental designs where we randomly assign debt. Our designs isolate the consequences of holding debt while controlling for potential confounding factors such as initial wealth levels, selection, risk, and time preferences. In our first set of experiments, we find that debt causes behavioral biases detrimental to subjects' financial payoffs. They play debt-biased strategies that are consistent with a model of debt aversion. Debt-biased behavior also deters subjects from arbitrage opportunities in borrowing decisions. In our second, income-focused debt experiment, we find mixed evidence. Debt-biased behavior varies with the saliency of debt. We do find suggestive evidence of a desire to reduce debt balances at the expense of actual earnings. Our findings go above and beyond traditional concepts in behavioral economics, and we can also show the opportunity cost of debt aversion at the extensive margin in addition to the intensive margin.
Description
| Type of resource | text |
|---|---|
| Form | electronic resource; remote; computer; online resource |
| Extent | 1 online resource. |
| Place | California |
| Place | [Stanford, California] |
| Publisher | [Stanford University] |
| Copyright date | 2021; ©2021 |
| Publication date | 2021; 2021 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Author | Shi, Mike |
|---|---|
| Degree supervisor | Pistaferri, Luigi |
| Thesis advisor | Pistaferri, Luigi |
| Thesis advisor | Niederle, Muriel |
| Thesis advisor | Roth, Alvin E, 1951- |
| Degree committee member | Niederle, Muriel |
| Degree committee member | Roth, Alvin E, 1951- |
| Associated with | Stanford University, Department of Economics |
Subjects
| Genre | Theses |
|---|---|
| Genre | Text |
Bibliographic information
| Statement of responsibility | Mike Shi. |
|---|---|
| Note | Submitted to the Department of Economics. |
| Thesis | Thesis Ph.D. Stanford University 2021. |
| Location | https://purl.stanford.edu/mx030xm6824 |
Access conditions
- Copyright
- © 2021 by Mike Shi
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
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