Personal debt crises: an economic approach

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Abstract
This article provides further empirical investigation, using an ongoing data-set, of the level of arrears experienced by debtors in crisis. Various extensions to the traditional choice model are reviewed as explanations for the presence of personal debt crises. The regression model shows significant effects of exogenous shocks and life cycle position on the level of debt. However, the most powerful explanation of the level of debt appears to be the degree of self-control (as captured by the over-commitment variable) a factor not normally included in studies of household behaviour. Future research is needed which attempts to capture the dimensions of personality associated with crisis debt and embed these in an econometric model.

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