TY  - BOOK
AU  - Martnez-Marquina, Alejandro
TI  - Opportunity cost of debt aversion
PY  - 2024///
PB  - American Economic Review
KW  - Economics
KW  - Financial decisions
KW  - Debt repayments
KW  - Credit boubles
KW  - Guaranteed investment
N2  - We provide evidence of the existence of debt aversion and its negative implications for financial decisions. In a new experimental design where subjects are assigned debt randomly, we quantify the opportunity cost of subjects' debt-biased decisions. One-third of our participants neglect high returns and focus instead on debt repayments. In addition, borrowing to invest is 50 percent less likely when it leads to indebtedness. On average, participants perceive $1 less in debt as equivalent to $1.03 in savings. Hence, a debt-averse agent will undertake a 10 percent guaranteed investment only if the cost of borrowing does not exceed 6.80 percent
UR  - https://www.aeaweb.org/articles?id=10.1257/aer.20221509
ER  -