Lius Oberrauch (Koblenz University): "Financial Literacy and Intertemporal Arbitrage"
Jana Hamdan (DIW): The Effect of Self-Control on Borrowing: Experimental Evidence
Melanie Koch (OENB): "The Effect of Social Comparison on Debt Taking: Experimental Evidence"
Household debt levels are a rising problem worldwide. At the same time, the observed levels of debt taking cannot always be explained by conventional economic theory. This puzzle motivates the research presented in this session. Low levels of financial literacy seem to offer an obvious solution, however financial education has been shown to have limited effects of improving debt related behaviors. Looking at behavioral explanations, such as present biased preferences, limited self-control and social preferences, seems like the next step. The papers in this session examine these three potential causes of debt taking and how these interact with financial literacy, using lab experiments conducted in Germany.