Measuring Aversion to Debt : An Experiment among Student Loan Candidates

Caetano, Gregorio ; Patrinos, Harry A. ; Palacios, Miguel

关键词: ACCESS TO HIGHER EDUCATION;    AMOUNT OF DEBT;    AMOUNT OF RISK;    ASSET PRICES;    ASSET PRICING;   

DOI  :  10.1596/1813-9450-5737
RP-ID  :  WPS5737

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper reports the results of anexperiment designed to test for the presence of debtaversion. The population who participated in the experimentwere recent financial aid candidates and the experimentfocused on student loans. The goal is to shed new light ondifferent aspects of the perceptions with respect to debt.These perceptions can prevent agents from choosing anoptimal portfolio or from undertaking attractive investmentopportunities, such as in education. The study designdisentangles two types of debt aversion: one that is studiedin the previous literature, which encompasses both framingand labeling effects, and another that controls for framingeffects and identifies only what we denote labeling debtaversion. The results suggest that participants in theexperiment exhibit debt aversion, and most of the debtaversion is due to labeling effects. Labeling a contract asa "loan"' decreases its probability of beingchosen over a financially equivalent contract by more than 8percent. The analysis also provides evidence that studentsare willing to pay a premium of about 4 percent of thefinanced value to avoid a contract labeled as debt.