We unearthed that 72% of our participants received much less relief than their total debts that are eligible
Reverse causality is another confound that is potential since specific habits such as for instance danger aversion and time choices could figure out indebtedness, as opposed to the reverse. We are able to rule down reverse causality due to the fact alterations in financial obligation we learned resulted from exogenously provided credit card debt relief. Nevertheless, our estimate for the results of debt settlement may nevertheless be biased if debt settlement is strongly correlated with initial debts.
To handle this, To address this we show that your debt relief choices produced by social employees triggered significant variation, making sure that more indebted individuals failed to always get more relief. We unearthed that 72% of our participants received considerably less relief than their total eligible debts, and, general, debt settlement amounts had been just averagely correlated (0.55) with initial financial obligation amounts. On average, relief provided had been SGD 3,709 significantly less than total debts that are eligible therefore the SD associated with the huge difference was SGD 7,293. As a further robustness check, we excluded individuals that has all eligible debts relieved (SI Appendix, Table S9) and discovered broadly comparable outcomes.
Next, we considered liquidity constraints as a alternate description: Highly indebted individuals may display present bias and risk aversion because having money at hand is much more essential when it’s tough to borrow (13). In that case, alterations in choice creating may be due to improvements in liquidity constraints, in place of alterations in financial obligation framework.
Used, the result of credit card debt relief on liquidity constraints is restricted. Liquidity from use of credit is not likely to enhance postrelief because finance institutions in Singapore have to implement earnings test to give credit, and, ergo, our test will not be eligible for credit, even after debt settlement. Continue reading