Debt perceptions: fairness judgments of debt relief for individuals and countries

Abstract

AbstractThis study examines how moral intuitions toward debt relief vary depending on whether a debt contract involves one country borrowing from another country or an individual borrowing from a bank. Participants respond to a vignette describing a basic debt dispute between a debtor and a lender. A judge in charge of settling the dispute decides to allow debt relief and participants express how fair they find the decision. Treatments vary (1) the debt context (international or person-bank), (2) the responsibility of lenders and debtors (whether their situations stem from bad luck or poor choices) and (3) whether a lender's profit motive is made salient. Results show that, across both international and person-bank debt, debt relief is perceived as being fairer when debtors are unlucky and when lenders are careless; profit salience, however, does not affect the perceived fairness of debt relief in either debt context. Results, when integrated with those from an initial related study, also point to anti-bank sentiment increasing the perceived fairness of debt relief when an individual borrows from a bank and to a consistent across-context ranking of the perceived fairness of debt relief in the scenario.