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A multivariate study of over‐indebtedness' causes and consequences
Author(s) -
GutiérrezNieto Begoña,
SerranoCinca Carlos,
CuestaߚGonzález Marta
Publication year - 2017
Publication title -
international journal of consumer studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.775
H-Index - 71
eISSN - 1470-6431
pISSN - 1470-6423
DOI - 10.1111/ijcs.12324
Subject(s) - functional illiteracy , financial literacy , blame , poverty , multivariate statistics , economics , explanatory model , welfare , finance , political science , economic growth , psychology , social psychology , mathematics , epistemology , law , market economy , philosophy , statistics
This paper proposes a comprehensive explanatory model to explain both causes and consequences of over‐indebtedness. It presents as causes some borrower aspects, such as propensity to indebtedness and low financial literacy. Other causes are borrower circumstances: adverse external shocks, borrower internal problems and financial institutions' pressure. The model incorporates consequences on the borrower, the lender and the society. The model has been tested with a survey filled in by experts and over‐indebted individuals. Results have been analysed using multivariate techniques, including canonical correlations. There are differences in the opinions of experts and individuals: the latter blame external shocks or financial institutions' pressure, while the former find relevant factors the financial illiteracy or the tendency to imitate others. Experts and individuals agree on the consequences: poverty growth in the society and declining borrower's welfare. The paper concludes with the need to improve financial literacy, especially in the risks involved in over‐indebtedness.