CONSUMER DEBT STRESS, CHANGES IN HOUSEHOLD DEBT, AND THE GREAT RECESSION
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dunn2016 - p. 201
Here we seek to add additional understanding to changes in consumer debt stress1 during the Great Recession by relating them to changes in eight different types of debt holdings during this period.
dunn2016 - p. 201
This survey contains four questions that address stress directly tied to debt and that can be used to construct a debt stress score for respondents.
dunn2016 - p. 202
Bridges and Disney (2010) use the UK Families and Children Survey to construct more objective measures of household financial stress. These objective measures include access to credit cards and other types of loans and being in arrears. They find that subjective measures of financial stress are related to subjective measures of psychological wellbeing (indicated by self reports of depression, mental illness, phobias, etc.); but there is a weaker link between their objective measures of financial stress and self-reported psychological wellbeing.
dunn2016 - p. 202
One of the first efforts to generate data to connect stress directly to debt in a survey instrument came in the late 1990s with the work of Lavrakas et al. (2000) and Drentea and Lavrakas (2000). These stress measures will be used in this work, as they identify stress specifically arising from debt. These same stress measures tied directly to debt have also been linked to movements in the Michigan Index of Consumer Sentiment by Ekici and Ozbeklik (2013).
dunn2016 - p. 203
In the financial counseling/personal finance literature, work has been done involving general financial distress measures. This includes extensive research by Garman and colleagues in developing a general financial wellbeing scale (Prawitz et al. 2006). We also note work by Bagwell and Kim (2003), Kim et al. (2006), and Dew (2007) on a variety of problems linked to debt including job absenteeism and marital dissatisfaction.
dunn2016 - p. 203
The CFM survey began in 2005.5 It is a national-level, monthly household telephone survey that uses random digit dialing techniques. It is not panel but represents a time series of cross-sectional observations, with the same questions being asked of a different randomly selected sample of subjects each month. Its data are weighted using information from the Current Population Survey to reflect national socioeconomic characteristics.
dunn2016 - p. 203
The four CFM survey questions designed to examine consumer debt stress were developed and tested to quantify self-reported aspects of stress as they were directly tied to the respondent’s debt, rather than matching independent self-reported measures of psychological stress to independent measures of indebtedness. The financial data are at the household level. Using standard 5-point response categories, the survey questions elicit: (a) the respondent’s frequency of worry over debt; (b) the respondent’s amount of stress from debt; (c) extent of the respondent’s expected problems from debt over the next 5 years; and (d) the respondent’s concern about the inability to ever pay off debt.
dunn2016 - p. 204
Debt Stress can also be presented in indexed form and tracked across time. The index is obtained by averaging the debt scores across the n individuals in the sample in a given month.
dunn2016 - p. 205
To investigate factors that give rise to differences in debt stress across the population, we examine the individual debt stress scores in a regression model where we include socioeconomic and demographic factors as well as debtrelated variables. A two-sided tobit model is used as the values of our debt stress scores by definition are constrained to be between zero and four, thus yielding a regression which is censored on two sides.