Household debt: An institutionalist perspective and empirical assessment

Abstract

The paper deals with the empirical evidence on household borrowing behavior from an institutionalist perspective. Assuming close interconnections between the availability of credit and consumerist culture, we estimate the effects of precedence of consumption, status consumption, and “investment”-minded buying driven by debt pattern. We rely on official statistics on household debt, disposable income and spending since the early 2000s to 2020. The institution of precedence of consumption is measured through data on loans drawn by households, outstanding loans, loan payments, household consumption and disposable income. Corresponding metrics illustrate that debt-financed consumption has become a widespread scheme. Financialization rate is measured separately for retail sector and housing market. Households are becoming more dependent on loan payments, as we estimated for different income groups using the paymentto-income ratios. In case with car loans, these metrics serve as indirect evidence for the embeddedness of conspicuous motive. Evidence on housing loans suggests that “investment”-minded buying can hardly result in a short-term gain. Research findings show that the pattern of precedence of consumption feeds the socially induced motives of conspicuous waste and speculation. Causality can go the other way too. The novelty of our approach is that we integrate the discourse of financialization into the institutionalist perspective and combine the theoretical constructs of precedence of consumption, conspicuous waste and speculative motive, seen as the factors of debt dependence. We contribute to applied studies by introducing factual data on household debt and providing evidence of interplay between these factors. The research is relevant socially and economically in view of the connection between unsustainable household debt and consumerist culture.