Income shock and financial well-being in the COVID-19 pandemic: financial resilience and psychological resilience as mediators

Abstract

Purpose The purpose of this study was to investigate the relationship between income shock suffered during the coronavirus pandemic and subsequent financial well-being (FWB) of Indian adults, mediated by financial resilience (FR) and psychological resilience (PR).Design/methodology/approach The authors propose a conceptual model for the relationship between income shock and FWB, with FR and PR as mediator variables. The authors consider four dimensions of financial resilience: economic resources, financial inclusion, financial knowledge and social capital. This study uses a unidimensional scale for PR. Data were collected from 370 respondents from 11 cities across India. Structural equation models were built to test the proposed hypotheses.Findings Income shock was negatively associated with FWB. Estimated path coefficients for FR and PR were statistically significant and confirmed a mediating role. Among the four dimensions of financial resilience, only economic resources were positively associated with FWB. The mediation relation between economic resources and FWB was larger than PR.Research limitations/implications Since convenience sampling was used to collect data, the results of this study are indicative but not generalizable.Social implications For individuals who suffered income shocks during the pandemic, adequate economic resources are crucial for FWB. Governmental disbursements, personal savings and medical or life insurance could provide an adequate safety net.Originality/value There are no extant studies that examine the association between income shocks and FWB in the pandemic, and this study contributes to the literature.

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“…These pressures were even higher for those who got furloughed or laid off (Yao and Zhang, 2023). Moreover, those who were already vulnerable before the pandemic (physically or economically) faced even more risks and uncertainties with regards to their health, income, safety and overall well-being (Kulshreshtha et al. , 2023).…”