Essays on debt, personality and well-being in Southeast Asia

Abstract

Southeast Asian countries, such as Thailand and Vietnam, have made remarkable progress in terms of economic development over the past decades. Yet, rural areas in these countries lag behind. This dissertation studies households in such rural areas in Thailand and Vietnam. It sheds light on (i) the influence of local shocks on individual well-being, (ii) household debt behaviour and expectations towards future income, and (iii) the role of non-cognitive skills on individual labour market outcomes. Hence, it provides rich insights into the factors influencing household perceptions and decision making behaviour as well as the importance of non-cognitive skills in rural areas of Southeast Asia. The first chapter of this dissertation provides information on the study background, the data and presents an overview of each Chapter. The remainder of the dissertation consists of four essays stretching out over the next Chapters. Chapter 2 analyses the impact of witnessing nearby flood events on a person's individual subjective well-being. While previous studies and a negative effect of directly experienced environmental shocks, this Chapter shows that observing such events also has detrimental consequences for individual well-being. We hereby compare individuals that self-reported a direct flood shock with those who did not. Additionally, it demonstrates that observing traumatic events not only impact current evaluations of subjective well-being but translate into negative future well-being expectations. Chapter 3 studies the relation between high income expectations and over-indebtedness. Extensive survey data on households´ borrowing behavior and future income expectations were collected for this study. Using indicators of objective and subjective over indebtedness, a strong positive relation between high income expectations and household over-indebtedness can be shown. An additional lab-in-the-field experiment reveals that over-confidence is related to over-borrowing. The last two Chapters (Chapter 4 and 5) focus on the importance of non-cognitive skills for individual labour market outcomes in a rural labour market setting. Measures of non-cognitive skills are validated in Chapter 4, studying one of the most commonly used models capturing a person's personality, the Big Five Factor model. The results reveal a five factor structure similar to that found in samples from industrialised countries. In a next step, Chapter 5 analyses the importance of non-cognitive skills for individual occupational attainment and earnings. The findings show that non-cognitive skills are important determinants for labour market outcomes in rural labour markets. A high level of responsibility and efficiency are important characteristics with respect to occupational attainment and emotional stability is associated with higher earnings.