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 -