Credit access and happiness: Evidence from Indonesia

Muhammad Yusuf Indra Purnama, Siti Aisyah Tri Rahayu, Mulyanto Mulyanto, Johadi Johadi

Abstract


The objective of this study is to investigate household credit access and its impact on happiness. We use data from the Indonesia Family Life Survey (IFLS) and employ Ordinary Least Square (OLS) as well as an Ordered Probit approach to test our empirical framework. Our results reveal that per capita expenditure has positively affects the probability of being granted credit, and people in urban communities benefit more from accessing credit than those in rural areas also document that those who successfully obtain credit tend to increase their probability of being happy. We then recommend an improvement in access to credit, particularly for poor people and those who live in rural communities, as an important policy implication. In addition, a better financial capability and financial literacy should be improved continuously to ensure the positive impact of credit on happiness as the ultimate goal in life.


Keywords


Credit Access, Households, IFLS, Happiness, Indonesia

Full Text:

PDF

References


Agarwal, S., Ambrose, B. W., & Chomsisengphet, S. (2008). Determinants of automobile loan default and prepayment. Economic Perspectives, 3Q(May 2014), 17–28.

Becchetti, L., & Conzo, P. (2013). Credit access and life satisfaction: Evaluating the nonmonetary effects of micro finance. Applied Economics, 45(9), 1201–1217.

Becchetti, L., Trovato, G., & Bedoya, D. A. L. (2011). Income, relational goods and happiness. Applied Economics, 43(3), 273–290.

Bertrand, M., & Mullainathan, S. (2001). Do People Mean What They Say? Implications for Subjective Survey Data. American Economic Review, 91(2), 67–72.

Besley, T. (1995). Nonmarket Institutions for Credit and Risk Sharing in Low-Income Countries. Journal of Economic Perspectives, 9(3), 115–127.

Blanchflower, D. G., & Oswald, A. J. (2004). Well-being over time in Britain and the USA. Journal of Public Economics, 88(7–8), 1359–1386.

Brown, S., Taylor, K., & Wheatley Price, S. (2005). Debt and distress: Evaluating the psychological cost of credit. Journal of Economic Psychology, 26(5), 642–663.

Chui, W. H., & Wong, M. Y. H. (2016). Gender Differences in Happiness and Life Satisfaction Among Adolescents in Hong Kong: Relationships and Self-Concept. Social Indicators Research, 125(3), 1035–1051. https://doi.org/10.1007/s11205-015-0867-z

Clark, A. E., & Oswald, A. J. (1994). Unhappiness and Unemployment. The Economic Journal, 104(424), 648.

Clarks Andrew E. , Fléche Sarah , Layards Richard, Powdthavee Nattavudh, W. G. (2019). The Origins of Happiness: The Science of Well-Being over the Life Course. Princeton University Press.

De Aghion, B. A. (1999). Development banking. Journal of Development Economics, 58(1), 83–100.

Demirguc-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2018). The Global Findex Database 2017: Measuring Financial Inclusion and Fintech Revolution.

Diener, E., Suh, E. M., Lucas, R. E., & Smith, H. L. (1999). Subjective well-being: Three decades of progress. Psychological Bulletin, 125(2), 276–302.

Di Tella, R., MacCulloch, R. J., & Oswald, A. J. (2001). Preferences over inflation and unemployment: Evidence from surveys of happiness. American Economic Review, 91(1), 335–347.

Di Tella, R., MacCulloch, R. J., & Oswald, A. J. (2003). The macroeconomics of happiness. Review of Economics and Statistics, 85(4), 809–827.

Easterlin. (1995). Will raising the incomes of all increase the happiness of all ? Journal of Economic Behavior and Organization, 27(1), 35–47.

Easterlin, R. A. (1974). Does Economic Growth Improve the Human Lot? Some Empirical Evidence. Nations and Households in Economic Growth: Essays in Honour of Moses Abramovitz (Eds) P.A. David and M.W. Reder, 89–125. https

Engelbrecht, H. J. (2009). Natural capital, subjective well-being, and the new welfare economics of sustainability: Some evidence from cross-country regressions. Ecological Economics, 69(2), 380–388.

Ferrer-i-Carbonell, A., & Frijters, P. (2004). How Important Is Methodology For The Estimates Of The Determinants Of Happiness? The Economic Journal, (2004), 641–659.

Frey, B. S., & Stutzer, A. (2002). What can economists learn from happiness research? Journal of Economic Literature, 40(2), 402–435.

Fukuyama, F. (1995). Social capital and global cconomy. Foreign Affairs, 74(5), 89–103.

Gallie, D., & Russell, H. (1998). Unemployment and life satisfaction: A cross-cultural comparison. Archives Europeennes de Sociologie, 39(2), 248–280.

Greene, W. H. (2003). Econometrical Analysis. Prentice Hall.

Johnson, D. R., & Wu, J. (2002). An empirical test of crisis, social selection, and role explanations of the relationship between marital disruption and psychological distress: A pooled time-series analysis of four-wave panel data. Journal of Marriage and Family, 64(1), 211–224.

Kahneman, D., Alan, K., Schkade, D., Schwarz, N., & Stone, A. (2006). Would You Be Happier If You Were Richer.pdf. Science, 1908(2006), 1908–1910.

Karlan, D. S. (2005). Using experimental economics to measure social capital and predict financial decisions. American Economic Review, 95(5), 1688–1699.

Khera, P. (2021). Digitalization: A Safe Path to A More Inclusive Recovery In Indonesia? International Monetary Fund (IMF)-Asia Pacific Department.

Konow, J., & Earley, J. (2008). The Hedonistic Paradox: Is homo economicus happier? Journal of Public Economics, 92(1–2), 1–33.

Liu, Z., Zhong, X., Zhang, T., & Li, W. (2020). Household debt and happiness: evidence from the China Household Finance Survey. Applied Economics Letters, 27(3), 199–205

Okten, C., & Osili, U. O. (2004). Social networks and credit access in Indonesia. World Development, 32(7), 1225–1246.

Ruberton, P. M., Gladstone, J., & Lyubomirsky, S. (2016). How Your Bank Balance Buys Happiness: The Importance of “Cash on Hand” to Life Satisfaction. Emotion, 16(5), 575–580.

Stiglitz, J. E., & Weiss, A. (1981). Credit rationing in markets with imperfect information. The American Economic Review, 71(3), 393–410.

Strauss, J., Witoelar, F., & Sikoki, B. (2009). The Fifth Wave of the Indonesia Family Life Survey: Overview and Field Report: Volume 1. The Fifth Wave of the Indonesia Family Life Survey: Overview and Field Report: Volume 1, (April 2009).

Stutzer, A., & Frey, B. S. (2006). Does marriage make people happy, or do happy people get married? Journal of Socio-Economics, 35(2), 326–347.

Tay, L., Batz, C., Parrigon, S., & Kuykendall, L. (2017). Debt and Subjective Well-being: The Other Side of the Income-Happiness Coin. Journal of Happiness Studies, 18(3), 903–937.

Taylor, M., Jenkins, S., & Sacker, A. (2011). Financial capability , income and psychological wellbeing. Institute for Social & Economic Research.

Trinugroho, I., Sawitri, H. S. R., Suam Toro, M. J., Khoiriyah, S., Santoso, A. B. (2017). How Ready Are People For Cashless Society?, Journal of Finance and Banking, 21(1), 105-112.

Trinigroho, I., Nugroho, A.A., Harmadi, H., Suyono, J., Suam Toro, M. J. (2017). Households, Financial Distress, and Predatory Lending: An Experimental Study, Journal of Finance and Banking, 21(3): 473-480.

Turvey, C. G., Kong, R., & Huo, X. (2010). Borrowing amongst friends: The economics of informal credit in rural China. China Agricultural Economic Review, 2(2), 133–147.

Van Praag, B. M. S., & Ferrer-i-Carbonell, A. (2008). Happiness Quantified: a Satisfaction calculus approach. Happiness Quantified. UOP Catalogue, Oxford University Press.

Winklemann, L., & Winklemann, R. (1998). Why are the unemployed so unhappy? Evidence from panel data. Economica, 65, 1–15.

Wydick, B. (1999). The effect of microenterprise lending on child schooling in Guatemala. Economic Development and Cultural Change, 47(4), 853–869.

Xiao, J. J., Yan, C., Bialowolski, P., & Porto, N. (2021). Consumer debt holding, income and happiness: evidence from China. International Journal of Bank Marketing, 39(5), 789–809.




DOI: https://doi.org/10.26905/jkdp.v26i3.7551

Refbacks

  • There are currently no refbacks.


Bookmark and Share


Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

Published by University of Merdeka Malang

Mailing Address:
2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: +62 813-3180-1534
Email: jkp@unmer.ac.id

This work is licensed under a Creative
Commons Attribution-ShareAlike 4.0