Reverse causality is another confound that is potential since specific actions such as for instance danger aversion and time choices could figure out indebtedness, as opposed to the reverse. We are able to rule away reverse causality as the noticeable alterations in financial obligation we learned resulted from exogenously given debt settlement. Nevertheless, our estimate associated with the ramifications of debt settlement may nevertheless be biased if credit card debt relief is strongly correlated with initial debts.
To handle this, To address this we show that your debt relief choices created by social employees led to significant variation, making sure that more indebted individuals would not always get more relief. We discovered that 72% of y our participants received even less relief than their total debts that are eligible and, general, debt settlement quantities had been only moderately correlated (0.55) with initial financial obligation amounts. On average, relief provided had been SGD 3,709 lower than total qualified debts, therefore the SD associated with the huge huge difference was SGD 7,293. As an additional robustness check, we excluded individuals who’d all qualified debts relieved (SI Appendix, Table S9) and found broadly comparable outcomes.
Next, we considered liquidity constraints being an explanation that is alternative Highly indebted individuals may show current bias and danger aversion because having cash at hand is more essential when it’s hard to borrow (13). In that case, alterations in choice generating might be owing to improvements in liquidity constraints, in place of alterations in financial obligation framework.