This thesis employs economic experiments and empirical methods to understand the role of comparison income in the demand of individuals' debt. It then investigates the determinants of UK individuals' attitude towards debt, focusing on the role played by comparison income. It uses data from the British Household Panel Survey (BHPS) and the New Earnings Survey (NES). The central contributions of this thesis include: (i) the implementation of a life-cycle experiment testing for the differences in consumption levels between Individual and Group treatments; (ii) the computation of a proxy for comparison income using both the British Household Panel Survey (BHPS) and the New Earnings Survey (NES); and (iii) the extension of individual demand for debt models with comparison income as main factor. This is achieved by designing and conducting human-subject experiments, wherein individuals execute life-cycle tasks. Results show evidence of larger consumption levels in the Group treatment as compared to the Individual treatment; supporting the notion of comparison consumption. In addition, the empirical methods consist in a tobit and fixed effect models, where individuals' demand for debt is function of several financial and demographic factors, including comparison income. Results show that comparison income plays a significant part in the individuals' demand for mortgage debt and non-mortgage debt. Besides, findings suggest that debtors are more likely to hold favourable attitude towards debt; and this is exacerbated by household relative income. Overall, results support the hypothesis of aspiration paradox (Olsen, 2008); which affirms individuals' aspirations may lead them to incur debt beyond their financial means.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:606442 |
| Date | January 2013 |
| Creators | Ejebu, Ourega-Zoé |
| Publisher | University of Aberdeen |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://digitool.abdn.ac.uk:80/webclient/DeliveryManager?pid=211098 |
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