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Does Financial Assistance Really Assist? The Impact of Debt on Wellbeing, Health Behavior and Self-Concept in Taiwan

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Abstract

In the current global environment of unpredictable economic adversity, financial help appears to be all the more important in order for people to make it through hard times. Social support theory expects that debt’s adverse impact on subjective well-being can be moderated by access to financial help within one’s social network. This study tests this hypothesis by extending research attention into social contacts and self-concept as well. Using a national probability sample of Taiwan, we conduct regression-estimation-with-measurement modeling to assess the impact of debt and unrealized loss (UL) in housing price on life situation. Our finding shows that both debt and UL produce direct negative impact on happiness and health behaviors, while they has scant influence on social contacts and self-esteem. Financial assistance from kin somewhat moderates the adverse influences of indebtedness, while financial assistance from friends and banks mostly represents a debt trap that leads to lower levels of life satisfaction and self-concept. We conclude that seeking financial help, in general, is a response to rather than a solution for indebtedness.

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Notes

  1. “Over 20 gangsters arrested over violent debt collection.” The China Post, November 7, 2007. “Gang arrested for violent debt collecting methods.” The China Post, May 10, 2011. The statistics from the Ministry of Interiors, Taiwan indicate that in 2009 there were 3,342 cases that involved violence in debt collection, the average amount per case being 2.9 million TW dollars (The current exchange rate of TD with US dollar is approximately 30:1). There is a down-trend over time: in 2013, the documented cases decreased to 2,715, with an average of .74 million dollars. Source: www.moi.gov.tw/stat/news_content.aspx?sn=8946&page=0. Access date: 2014/11/4.

  2. The TSCS questionnaire cited health problems, loss of family member or unemployment as general causes for economic difficulty in soliciting responses, but did not collect information on the difficulty for each respondent.

  3. In addition to the three sources, other helps were also probed, such as charity, government, rotating credit associations and pawn shops. However, we decided to not analyze them because of low incidences.

  4. The TSCS data provides a measure of whether the respondents approached in the past 12 months someone they know to borrow money. Those with a positive answer comprise 17.3 %. This information is somewhat redundant and does not show if such loan happened when in a financial difficulty. Our result did not change either with or without this variable in modeling. For parsimony, we decided not to incorporate it in analysis.

  5. The seven items are: how would you describe yourself as a person: (1) I work hard to complete my daily tasks, even if I am slightly sick or when there is another legitimate reason for taking a break; (2) I perform to the best of my ability even on a task that I do not like. (3) I work hard to maintain my performance on a task, even if the task takes a long time to start producing any results. (4) When I make plans, I am almost certain that I can make them work. (5) Overall, I can do anything as well as most people can do. (6) I get along with people around me very well. (7) I feel that I have much influence over the things that happen to me. This scale captures not only the conventional dimension of positive self (or self-esteem) but also those of perseverance and capacity.

  6. Their linguistic and genetic ties are closely linked to other Austronesian ethnic groups. We call them aboriginals in the remainder of the paper.

  7. We tested the class-stratified impact hypothesis to secure robustness for H1. We split the respondents according to the median monthly family income (60,000 TD), and conducted the same estimation for both high-income and low-income groups. The “cash deficit” registers a coefficient of −.763, and −.605, respectively (not shown in table to save space). A test of the difference of the two regression coefficients results in a z = .810, which is below the significance threshold (Clogg et al. 1995). However, among the “just balanced groups”, the higher income group did have a lower level of unhappiness (−.301 vs. −.599, z = .2.1, p < .05). Thus, this study is only able to marshal mixed findings. Debt for adults cannot be considered as an access to credit that signals a sort of “utility enhancing” or “optimizing opportunities,” as is suggested in previous research based on the youth with educational debt (Dwyer et al. 2011) or on the general population (Bertola et al. 2006). In general, among the adult population in Taiwan, the negative impact of debt on subjective wellbeing appears to exist across income groups (disregarding its different magnitudes in each income group).

  8. In estimating substance use, we are aware of a potential difference across sexes: compared to their female counterparts, males in debt may be more likely consume psychoactive substances. We further examined this possibility by adding the interaction terms of sex with deficit in liquidity in the equations. The outcome shows the expected difference between males and females. The similar operation of sex with financial assistances from parents and friends (but not from banks) also obtained comparable results. Such gender difference, however, was trivial in the estimation of subjective wellbeing, social contact and self-concept.

  9. A subpopulation that reported they sought financial help from other sources was not included in analysis, so that the sample size decreased approximately 11 %. This decrease is also applied in equations of the help from friend and from banks. See the last entry showing the number of respondents used in analysis on Table 2.

  10. Indeed, the respondents in debt are more likely to borrow money from parents. We found an odd ratio as high as 7.4 (p < .001) when other background variables are controlled in a binary logistic estimation.

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Authors and Affiliations

  1. Research Center for Humanities and Social Sciences, Academia Sinica, Taipei, Taiwan

    Ming-Chang Tsai

  2. Department of Sociology, Ohio State University, Columbus, OH, USA

    Rachel E. Dwyer

  3. Department of Sociology, Tunghai University, Taichung, Taiwan

    Ruey-Ming Tsay

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  1. Ming-Chang Tsai
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  2. Rachel E. Dwyer
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  3. Ruey-Ming Tsay
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Correspondence to Ming-Chang Tsai.

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Tsai, MC., Dwyer, R.E. & Tsay, RM. Does Financial Assistance Really Assist? The Impact of Debt on Wellbeing, Health Behavior and Self-Concept in Taiwan. Soc Indic Res 125, 127–147 (2016). https://doi.org/10.1007/s11205-014-0835-z

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