Cognitive ability, cognitive aging, and debt accumulation

Marco Angrisani, Jeremy Burke and Arie Kapteyn

Journal of Banking & Finance, 2023, vol. 148, issue C

Abstract: Originating and managing debt are cognitively demanding tasks that have become more challenging in the past few decades with the increasing variety and complexity of available financial products. We examine how cognitive ability is related to debt burdens among older adults and whether this relationship has changed over time with the increasingly complex financial landscape. We find that cognitive ability is an important predictor of debt burdens in older age and that individuals with higher cognitive ability have taken on higher debt levels relative to their counterparts in more complex financial environments, leading to increased financial fragility among relatively more sophisticated consumers. Our findings are broadly inconsistent with financial intermediaries systematically pushing increasingly complicated financial products onto unsophisticated borrowers.

Keywords: Cognitive ability; Ageing; Debt; Financial fragility (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Cognitive Ability, Cognitive Aging, and Debt Accumulation (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:148:y:2023:i:c:s0378426622003272

DOI: 10.1016/j.jbankfin.2022.106747

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