Social Indicators Research

, Volume 139, Issue 1, pp 147–161 | Cite as

Hard Times! How do Households Cope with Financial Difficulties? Evidence from the Swiss Household Panel

  • Piotr BiałowolskiEmail author


This study investigates impact of debt arrears and various consequential compensatory actions on self-reported satisfaction with life and the financial situation. The link between financial difficulties and the responses they demand has rarely been translated into satisfaction measures in the past. This study informs the literature about actual consequences of problems with arrears and impact of different coping strategies on household satisfaction measures. To address the questions at hand, data from the six (2010–2015) waves of the Swiss Household Panel were examined. A panel data model with fixed effects estimator was applied to account for unobserved population heterogeneity and mitigate the issues of omitted variables. The study confirmed that severe debt problems disproportionally affected self-reported satisfaction measures. Responses to arrears, if representing likely long-term solutions, did not signify further deterioration in self-reported measures. However, if arrears required resort to bank credit, disposal of household valuables or borrowing from family and friends, satisfaction with the household financial situation and household head life satisfaction were likely to suffer more.


Arrears Financial situation Life satisfaction Longitudinal data Swiss Household Panel 



The work was financed within the 7th Framework Programme [FP7-PEOPLE COFUND No. 609402 –“2020 Researchers: Train 2 Move” (T2 M)]. Author would like to thank two anonymous reviewers and Patrick Fox for their very helpful comments. This study has been realized using the data collected by the Swiss Household Panel (SHP), which is based at the Swiss Centre of Expertise in the Social Sciences FORS. The SHP project is financed by the Swiss National Science Foundation.


  1. Ainslie, G. (1991). Derivation of “rational” economic behavior from hyperbolic discount curves. The American Economic Review, 81(2), 332–340. Retrieved from
  2. Anderson, S., & Baland, J.-M. (2002). The economics of roscas and intrahousehold resource allocation. The Quarterly Journal of Economics, 117(3), 963–995. doi: 10.1162/003355302760193931.CrossRefGoogle Scholar
  3. Baland, J.-M., Guirkinger, C., & Mali, C. (2011). Pretending to be poor: Borrowing to escape forced solidarity in Cameroon. Economic Development and Cultural Change, 60(1), 1–16. doi: 10.1086/661220.CrossRefGoogle Scholar
  4. Betti, G., Dourmashkin, N., Rossi, M., Verma, V., & Yin, Y. (2001). Study of the problem of consumer indebtedness: Statistical aspects final report. London: ORC Macro.Google Scholar
  5. Białowolski, P., & Węziak-Białowolska, D. (2014). The Index of household financial condition, combining subjective and objective indicators: An appraisal of Italian households. Social Indicators Research, 118(1), 365–385. doi: 10.1007/s11205-013-0401-0.CrossRefGoogle Scholar
  6. Binder, M., & Coad, A. (2015). Heterogeneity in the Relationship between unemployment and subjective wellbeing: A quantile approach. Economica, 82, 865–891. doi: 10.1111/ecca.12150.CrossRefGoogle Scholar
  7. Bolton, L. E., Bloom, P. N., & Cohen, J. B. (2011). Using loan plus lender literacy information to combat one-sided marketing of debt consolidation loans. Journal of Marketing Research, 48(SPL), S51–S59.CrossRefGoogle Scholar
  8. Breusch, T. S., & Pagan, R. (1979). A simple test for heteroscedasticity and random coefficient variation. Econometrica, 47(5), 1287–1294. doi: 10.2307/1911963.CrossRefGoogle Scholar
  9. Bridges, S., & Disney, R. (2004). Use of credit and arrears on debt among low-income families in the United Kingdom. Fiscal Studies, 25(1), 1–25. doi: 10.1111/j.1475-5890.2004.tb00094.x.CrossRefGoogle Scholar
  10. Bridges, S., & Disney, R. (2010). Debt and depression. Journal of Health Economics, 29(3), 388–403. doi: 10.1016/j.jhealeco.2010.02.003.CrossRefGoogle Scholar
  11. Brown, S., Taylor, K., & Wheatley Price, S. (2005). Debt and distress: Evaluating the psychological cost of credit. Journal of Economic Psychology, 26(5), 642–663. doi: 10.1016/j.joep.2005.01.002.CrossRefGoogle Scholar
  12. Burgard, S. A., Seefeldt, K. S., & Zelner, S. (2012). Housing instability and health: Findings from the Michigan recession and recovery study. Social Science and Medicine, 75(12), 2215–2224. doi: 10.1016/j.socscimed.2012.08.020.CrossRefGoogle Scholar
  13. Calvet, L. E., Campbell, J. Y., & Sodini, P. (2009). Measuring the financial sophistication of households. The American Economic Review, 99(2), 393–398. Retrieved from
  14. Christen, M., & Morgan, R. M. (2005). Keeping up with the Joneses: Analyzing the effect of income inequality on consumer borrowing. Quantitative Marketing and Economics, 3(2), 145–173. doi: 10.1007/s11129-005-0351-1.CrossRefGoogle Scholar
  15. Dhar, R., & Zhu, N. (2006). Up close and personal: Investor sophistication and the disposition effect. Management Science, 52(5), 726–740. doi: 10.1287/mnsc.1040.0473.CrossRefGoogle Scholar
  16. Duygan-Bump, B., & Grant, C. (2009). Household debt repayment behaviour: What role do institutions play? Economic Policy, 24(57), 107–140. doi: 10.1111/j.1468-0327.2009.00215.x.CrossRefGoogle Scholar
  17. Estelami, H. (2014). An ethnographic study of consumer financial sophistication. Journal of Consumer Behaviour, 13, 328–341. doi: 10.1002/cb.1472.CrossRefGoogle Scholar
  18. Eugster, B., Lalive, R., Steinhauer, A., & Zweimüller, J. (2017). Culture, work attitudes and job search: Evidence from the Swiss Language Border. Journal of the European Economic Association. doi: 10.1093/jeea/jvw024.Google Scholar
  19. Frey, B. S., & Stutzer, A. (2002). What can economists learn from happiness research? Journal of Economic Literature, 40(2), 402–435. Retrieved from
  20. Friedman, M. (1957). A theory of the consumption function. Princeton, NJ: Princeton University Press.Google Scholar
  21. Frijters, P., Haisken-DeNew, J. P., & Shields, M. A. (2004). Money does matter! evidence from increasing real income and life satisfaction in East Germany following reunification. American Economic Review, 94(3), 730–741. doi: 10.1257/0002828041464551.CrossRefGoogle Scholar
  22. Guin, B. (2015). Culture and household saving. In Fourth conference on household finance and consumption. Retrieved from
  23. Hausman, J. A. (1978). Specification tests in econometrics. Econometrica, 46(6), 1251–1271.CrossRefGoogle Scholar
  24. Jappelli, T., Pagano, M., & Di Maggio, M. (2008). Households’ indebtedness and financial fragility. Journal of Financial Management Markets and Institutions, 1(1), 23–46.Google Scholar
  25. Jentzsch, N., & Riestra, A. S. J. (2006). Consumer credit markets in the United States and Europe. In G. Bertola, R. Disney, & C. Grant (Eds.), The economics of consumer credit (pp. 27–63). Cambridge, Massachusetts: The MIT Press.Google Scholar
  26. Kahneman, D., Knetsch, J. L., & Thaler, R. H. (1991). Anomalies: The endowment effect, loss aversion, and status quo bias. Journal of Economic Perspectives, 5(1), 193–206. doi: 10.1257/jep.5.1.193.CrossRefGoogle Scholar
  27. Kassenboehmer, S. C., & Haisken-DeNew, J. P. (2009). You’re fired! The causal negative effect of entry unemployment on life satisfaction. The Economic Journal, 119, 448–462. doi: 10.1111/j.1468-0297.2008.02246.x.CrossRefGoogle Scholar
  28. Kempson, E., Mckay, S., & Willitts, M. (2004). Characteristics of families in debt and the nature of indebtedness. Leeds: Department for Work and Pensions under licence from the Controller of Her Majesty’s Stationery Office by Corporate Document Services.Google Scholar
  29. Laibson, D. (1997). Golden eggs and hyperbolic discounting. The Quarterly Journal of Economics, 112(2), 443–477.CrossRefGoogle Scholar
  30. Loewenstein, G., & Thaler, R. H. (1989). Anomalies: intertemporal choice. Journal of Economic Perspectives, 3(4), 181–193. doi: 10.1257/jep.3.4.181.CrossRefGoogle Scholar
  31. Mckenzie, D. J. (2003). How do households cope with aggregate shocks? Evidence from the Mexican Peso Crisis. World Development, 31(7), 1179–1199. doi: 10.1016/S0305-750X(03)00064-0.CrossRefGoogle Scholar
  32. Modigliani, F., & Brumberg, R. (1954). Utility analysis and the consumption function: An interpretation of the cross-section data. In K. Kurihara (Ed.), Post-keynesion economics. New Brunswick: Rutgers University Press.Google Scholar
  33. Neto, F. (1993). The satisfaction with life scale: Psychometrics properties in an adolescent sample. Journal of Youth and Adolescence, 22(2), 125–134. Retrieved from
  34. Nettleton, S., & Burrows, R. (1998). Mortgage debt, insecure home ownership and health: An exploratory analysis. Sociology of Health & Illness, 20(5), 731–753. doi: 10.1111/1467-9566.00127.CrossRefGoogle Scholar
  35. Nettleton, S., & Burrows, R. (2001). Families coping with the experience of mortgage repossession in the “new landscape of precariousness”. Community, Work & Family, 4(3), 253–272. doi: 10.1080/0140511012008933.CrossRefGoogle Scholar
  36. Oswald, A. J. (1997). Happiness and economic performance. The Economic Journal, 107(445), 1815–1831. Retrieved from
  37. Rhemtulla, M., Brosseau-Liard, P. É., & Savalei, V. (2012). When can categorical variables be treated as continuous? A comparison of robust continuous and categorical SEM estimation methods under suboptimal conditions. Psychological Methods, 17(3), 354–373. doi: 10.1037/a0029315.CrossRefGoogle Scholar
  38. Selenko, E., & Batinic, B. (2011). Beyond debt. A moderator analysis of the relationship between perceived financial strain and mental health. Social Science and Medicine, 73(12), 1725–1732. doi: 10.1016/j.socscimed.2011.09.022.CrossRefGoogle Scholar
  39. Sen, A. (1990). Gender and cooperative conflicts. In I. Tinker (Ed.), Persistent inequalities: women and world development (pp. 123–149). Oxford: Oxford University Press.Google Scholar
  40. Sweet, E., Nandi, A., Adam, E. K., & McDade, T. W. (2013). The high price of debt: Household financial debt and its impact on mental and physical health. Social Science and Medicine, 91, 94–100. doi: 10.1016/j.socscimed.2013.05.009.CrossRefGoogle Scholar
  41. Thaler, R. H. (1990). Saving, fungibility, and mental accounts. Journal of Economic Perspectives, 4(1), 193–205.CrossRefGoogle Scholar
  42. Thaler, R. H. (1999). Mental accounting matters. Journal of Behavioral Decision Making, 12(3), 183–206. doi: 10.1002/(SICI)1099-0771(199909)12:3<183:AID-BDM318>3.0.CO;2-F.CrossRefGoogle Scholar
  43. Thaler, R. H. (2008). Mental accounting and consumer choice. Marketing Science, 27(1), 15–25. doi: 10.1287/mksc.1070.0330.CrossRefGoogle Scholar
  44. Thaler, R. H., & Benartzi, S. (2004). Save more tomorrow™: Using behavioral economics to increase employee saving. Journal of Political Economy, 112(S1), S164–S187. doi: 10.1086/380085.CrossRefGoogle Scholar
  45. Thaler, R. H., & Sunstein, C. R. (2003). Libertarian paternalism. The American Economic Review, 93(2), 175–179. Retrieved from
  46. Thaler, R. H., Tversky, A., Kahneman, D., & Schwartz, A. (1997). The effect of myopia and loss aversion on risk taking: An experimental test. The Quarterly Journal of Economics, 112(2), 647–661. doi: 10.1080/02724980343000242.CrossRefGoogle Scholar
  47. Voorpostel, M., Tillmann, R., Lebert, F., Kuhn, U., Lipps, O., Ryser, V.-A., et al. (2014). Swiss household panel userguide (2009–2013), Wave 15, December 2014. Laisanne: FORS.Google Scholar
  48. Waldron, R., & Redmond, D. (2017). “We’re just existing, not living!” Mortgage stress and the concealed costs of coping with crisis. Housing Studies. doi: 10.1080/02673037.2016.1224323.Google Scholar
  49. Walker, C. M. (1996). Financial management, coping and debt in households under financial strain. Journal of Economic Psychology, 17(6), 789–807. doi: 10.1016/S0167-4870(96)00036-0.CrossRefGoogle Scholar
  50. Whitfield, G., & Dearden, C. (2011). Low Income Households: Casualties of the boom, casualties of the bust? Social Policy & Society, 11(1), 81–91. doi: 10.1017/S1474746411000431.CrossRefGoogle Scholar
  51. Wooldridge, J. M. (2002). Econometric analysis of cross section and panel data (second). Cambridge, Massachusetts; London, England: The MIT Press.
  52. Worthington, A. C. (2006). Debt as a source of financial stress in Australian households. International Journal of Consumer Studies, 30(1), 2–15. doi: 10.1111/j.1470-6431.2005.00420.x.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media B.V. 2017

Authors and Affiliations

  1. 1.Department of Economics, Social Studies, Applied Mathematics and StatisticsUniversity of TorinoTurinItaly
  2. 2.Warsaw School of EconomicsInstitute of Statistics and DemographyWarsawPoland

Personalised recommendations