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Title Financial Stress and Household Behavior: A Case Study of Rawalpindi, Pakistan

Author(s) Azhar Mehmood

Abstract Human economic decisions depend upon their preferences and motives which optimize their satisfaction level and lead their lives to a better end. Households take prime decisions about Consumption and saving. These decisions are affected by different demographic, social and economic factors. This study, tries to explore beahvioural factors which affect human decisions by using primary data of 243 households belonging to salaried class. Financial stress is the key variable which distort the economic decision about saving. Impulsive behaviour, consumer loan, consumer financing instruments, pro-consumptive behaviour, family financial support and domestic externalities are the factors which cause financial stress among households of salaried class. The descriptive analysis shows all variables have significant role in determining of financial stress while ordered logit estimations shows that consumer loan, pro-consumptive behaviour and family financial support are statistically significant factors. 63 % of respondents show impulsive behaviour when something likes or listen about promotions. 66 % of respondents agree that consumer loan makes life worse while 69 % of respondents reports that they feel anxiety when they avail any type of loan, which is a vital symptoms of financial stress. 28 % of respondents feel distress after using Consumer financing instruments of respondents such instruments. 47 % of respondents report that they become fed up by making regular payments while 48 % of respondents are of view that pro-consumption leads to distress. Family financial support is negatively correlate with financial stress as 72 % of respondents verify this fact that increase the family financial support decrease the level of depression among households. 75 % of respondents report that demonstration effect distort the consumption pattern which further leads to early utilization of financial resources which further leads to financial stress. The marginal effects of accepted region (i.e. agree & strongly agree) shows that significant variables have role in determination of financial stress. Consumer loan has 7.5 % while family financial support has 3.8 % and domestic externalities has 4.3 % impact in determination of financial stress. Marginal effects of OLOGIT saving model in accepted region shows that consumer loan has 3.5 % while pro-consumptive behaviour has 3.6 % and domestic externalities has 1.9 % impact in determination of saving behaviours. The financial stress OLOGIT model concludes that consumer loan and domestic externalities have positive impact on financial stress whereas family financial support has negative impact. The saving OLOGIT model concludes that consumer loan, pro-consumptive behaviour and domestic externalities have negative impact on saving behaviour of salaried class.

Type Thesis/Dissertation

Faculty Management Sciences

Department Economics

Language English

Publication Date 2021-08-31

Subject Behavioral Economics

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