Marie Skłodowska-Curie Individual Fellowship

"Eliciting Preferences over Saving and Borrowing"


Borrowing and saving decisions are among the most important and economically significant choices people face in their lifetime. An unwillingness to save may have severe economic implications such as insufficient retirement savings. In the same way, borrowing too much or too little can have negative economic implications. Debt aversion, defined as an unwillingness to take on debt even if economically beneficial, has received increased attention by researchers lately, for its adverse effects on financial decision-making, such as preventing optimal portfolio choice or a failure to invest in profitable investment projects. While recent experimental studies do find evidence supporting the general existence of debt aversion on an aggregate level, this phenomenon remains poorly understood on the individual level. No study so far explicitly measures individual differences in the degree of debt aversion. Moreover, debt aversion is likely to interact with other domains of preference, such as preferences over time, risk and losses. These links have not yet been analyzed, neither theoretically nor empirically.

The overall aim of this project was thus to significantly enhance the understanding of borrowing and saving decisions. Specifically, this project aimed to establish whether preferences over saving and borrowing (such as debt aversion) are preferences in their own right, that cannot be explained with other preferences such as preferences over time, risk and losses. Further, this project aimed to explore how preferences over saving and borrowing interact with other domains of preferences, such as risk and time preferences.

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No. 795958.