Journal of Business Economics

, Volume 87, Issue 5, pp 645–668 | Cite as

Towards more sustainable debt attitudes and behaviors: the importance of basic economic skills

  • Michael Goedde-Menke
  • Carsten Erner
  • Michael Oberste
Original Paper
First Online:

Abstract

This research builds on the idea that debt-related financial distress faced by an individual results primarily from the inability to understand and apply fundamental economic concepts to debt decisions rather than from a lack of highly specific financial knowledge. This notion offers a potential explanation for why current financial literacy programs, which generally focus on the latter aspect, are considered to be mostly ineffective. We hypothesize that the understanding of fundamental economic concepts plays an essential role in explaining debt attitudes and behaviors. To test this hypothesis, we empirically examine how basic economic skills relate to these traits among German adolescents while controlling for their levels of financial literacy. Our results indicate that basic economic skills beneficially relate to both individual debt attitudes and behaviors. In contrast, we do not find a significant impact of financial literacy. Therefore, a stronger consideration of fundamental economic concepts in financial literacy programs might be a fruitful way to increase their effectiveness.

Keywords

Financial literacy Economic literacy Economic education Debt attitude Debt behavior 

JEL Classification

D12 D14 D18 
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Notes

Acknowledgements

We would like to thank Thomas Apolte, Gerd-Jan Krol, Thomas Langer, Christian Müller, and participants at the 2012 Association of European Economics Education (AEEE) Conference in Cologne and the 2012 Financial Literacy and Economic Education Conference in Kansas City for their valuable comments.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2017

Authors and Affiliations

  • Michael Goedde-Menke
    • 1
    • 2
  • Carsten Erner
    • 1
    • 2
  • Michael Oberste
    • 3
  1. 1.Anderson School of ManagementUniversity of California, Los AngelesLos AngelesUSA
  2. 2.Finance Center MünsterUniversity of MünsterMünsterGermany
  3. 3.Center for Interdisciplinary EconomicsUniversity of MünsterMünsterGermany

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