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Self-control, financial literacy & the co-holding puzzle

Gathergood, John; Weber, Jörg

Authors

Jörg Weber joerg.weber@nottingham.ac.uk



Abstract

We use UK survey data to analyze the puzzling co-existence of high cost revolving consumer credit alongside low yield liquid savings in household balance sheets, which we name the ‘co-holding puzzle'. Approximately 12% of households in our sample co-hold, on average, £3800 of revolving consumer credit on which they incur interest charges, even though they could immediately pay down all this debt using their liquid assets. Co-holders are typically more financially literate, with above average income and education. In most estimates co-holding is also associated with impulsive spending behavior on the part of the household. Our results provide empirical support to theoretical models in which households co-hold as a means of managing self-control problems.

Journal Article Type Article
Publication Date May 1, 2014
Journal Journal of Economic Behavior & Organization
Electronic ISSN 0167-2681
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 107
APA6 Citation Gathergood, J., & Weber, J. (2014). Self-control, financial literacy & the co-holding puzzle. Journal of Economic Behavior and Organization, 107, https://doi.org/10.1016/j.jebo.2014.04.018
DOI https://doi.org/10.1016/j.jebo.2014.04.018
Keywords Consumer credit; Self-control; Financial literacy
Publisher URL http://www.sciencedirect.com/science/article/pii/S0167268114001231
Copyright Statement Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by/4.0

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by/4.0





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