Reverse causality is yet another confound that is potential since individual actions 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 as the alterations in financial obligation we learned resulted from exogenously issued credit card debt relief. Nevertheless, our estimate associated with aftereffects of debt settlement may be biased if still debt settlement is strongly correlated with initial debts.
To deal with this, To address this show that is we your debt relief choices produced by social employees led to significant variation, making sure that more indebted individuals would not always receive more relief. We unearthed that 72% of our participants received much less relief than their total debts that are eligible and, general, debt settlement quantities had been just reasonably correlated (0.55) with initial financial obligation amounts. On average, relief awarded had been SGD 3,709 lower than total qualified debts, while the SD associated with the difference was SGD 7,293. As an additional robustness check, we excluded individuals that has all qualified debts relieved (SI Appendix, Table S9) and discovered broadly comparable outcomes.
Next, we considered liquidity constraints as an explanation that is alternative Highly indebted individuals may show current bias and danger aversion because having cash at hand is much more crucial when it’s tough to borrow (13).