The Effect of Self-Control on Borrowing: Experimental Evidence

Antonia Grohmann and Jana S. Hamdan
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Antonia Grohmann: Aarhus University and DIW Berlin
Jana S. Hamdan: HU Berlin and DIW Berlin

No 264, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: This paper examines the effect of reduced self-control on debt-taking in a laboratory experiment. We manipulate self-control using an ego depletion task and show that it is effective. Following the ego depletion task, participants can anonymously buy hot drinks on credit. We find no significant average effects, but find that treated individuals that have low financial literacy are more likely to buy drinks. We complement our experimental analysis with survey evidence that suggests that people with low self-control have more problems with the repayment of consumption debt, but this relationship is, in line with the experimental results, weaker for individuals with high financial literacy.

Keywords: debt; consumption; borrowing; self-control; ego depletion (search for similar items in EconPapers)
JEL-codes: C91 D14 G51 (search for similar items in EconPapers)
Date: 2020-12-22
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-fle and nep-neu
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Persistent link: https://EconPapers.repec.org/RePEc:rco:dpaper:264

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