Household Debt Research Articles

Do higher public and private debt levels benefit the wealthy? An empirical analysis of top wealth shares in the UK

Purpose Despite the concomitant rise in recent decades in both debt levels (public as well as private) and wealth inequality, empirical evidence on the relationship is absent in existing literature. This is striking especially since recent theoretical contributions point to a link between debt and wealth inequality. We contribute to the debate by investigating empirically whether higher levels of UK public and household debt increase the UK wealth concentration at the top 1 and 10% of the wealth distribution.Design/methodology/approach We employ the Autoregressive Distributed Lag (ARDL) cointegration approach with UK time series data from 1970 to 2019. For robustness, a further analysis using panel data fixed effects estimation on a cross-country sample that also includes France and the USA is undertaken. We also use bootstrapping to conservatively estimate statistical significance.Findings Higher levels of public and household debt are found to increase wealth concentration at the top 1 and 10%. The effect is stronger for household debt. Fixed effects estimation on a cross-country dataset supports the results for the UK.Originality/valueThis study is the first to investigate empirically whether rising levels of UK public and household debt benefit the wealthy and thus widen the gap between the “haves” and “have-nots”.

EU-induced financialisation and its impact on the Greek wage share, 1999–2021

This paper examines the determinants of the income share of wage earners in the non-financial, private sectors of Greece since its introduction to the Eurozone in 1999. The main outcome of the integration of Greece into the Eurozone has been the financialisation of its economy, which has been particularly influential for households since it led to the rapid rise of household indebtedness. Building on recent research which shows that financialisation shape wage bargaining outcomes, we use quarterly data from the Eurostat and demonstrate that the relative size of the FIRE sectors and the increase in household debt have been negative drivers of the wage share in Greece over the last 22 years. Our findings also suggest that the employment-tied social benefits system and tertiary education provision have also been important determinants of workers’ income share.

Consumption patterns of indebted households: unravelling the relevance of fiscal policy

AbstractWe have investigated the influence of fiscal instruments, notably taxes and government spending, on household consumption in two different samples and two measures of household debt to provide a comprehensive analysis of the topic. We used dynamic panel models and the Generalised Method of Moments (GMM) approach for 24 and 32 advanced and emerging countries from 1995 to 2020. Our findings show that fiscal impulses increase private consumption. However, when households are highly indebted, the effects are different, and the increase in public spending or the reduced taxes discourages household consumption compared to the baseline (lower debt) group. These results suggest a precautionary effect.

Informal Credits in India’s Agriculture Sector: Debt Incidence, Size and Distribution across Major Farm-size Groups

Until recently, studies on agricultural finance in India mostly focus on farmers’ access to formal credits, thereby largely sidelining their informal borrowings. This study makes an effort to present an analysis of farmers’ informal debts and their distribution across the major farm-size groups in India. The study uses unit-level data from the 77th round ‘Situation Assessment Survey (SAS)’ of agricultural households conducted by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MOSPI), Government of India (GOI), during January–December, 2019. Data were collected for the reference period of July 2018–June 2019. We use descriptive statistics and multivariate regression procedures for analysis. Results show that about one-half of the borrowers continue to depend on informal credit sources—partially or fully. Informal sources also account for about one-third of the total debt of the agricultural households. Informal debt incidence (IDI) and informal debt share (IDS) are found to be higher among the smallholders. Our findings are imperative of policy measures to improve the current state of the antecedents of formal credit access to benefit the otherwise high default risk and credit-rationed smallholders. Future studies may focus on formal credit rationing, informal credit terms and repayment burden of the agricultural households in India.

Factors affecting the labor migrat to Thailand of people in Phonthong District, Champasak Province

This research are to investigate the factors that influence labor migration to Thailand in Phon Thong District, Champasak Province. The primary data for this study was obtained from household interviews conducted in the Phon Thong District of Champasak Province. Particularly, households in five villages where a greater number of workers migrate to work in the Kingdom of Thailand, like Khanat village, Sackmaung village, Samanh village, Xongxay village, and Phaling village, are 336 households. The Logit Model was used to determine the factors influencing labor migration to Thailand. The research findings show that the gender of the household head, the amount of labor in the home, having access to routes, and household debt are factors that positively affect the increasing number of people migrating to Thailand to find jobs. At the same time, the factors that have a negative effect on the decreasing number of migrations of workers to work in Thailand are: agricultural production area, production efficiency, access to irrigation systems, and the ability to find jobs locally, which reflect the external pressure that causes the migration of labor outside the country. According to an analysis of the effects of labor migration to Thailand on household economies, households with household members employed there have higher incomes, expenses, and household property than households without household members employed there, by 23.78%, 20.77%, and 21.26%, respectively. The average amount of money earned from working and bringing home to the family each year is 18,040.90 baht per person, which can significantly improve the quality of life in the household

Factors Influencing Household Debt Structure under Various Credit Constraints

Household debt is a critical component of family financial management, especially considering the prevalence of credit constraints. This study investigates the determinants of Chinese household debt structure, focusing on the choice between formal and informal borrowing and the proportion of formal debt under different credit constraints. Data from the 2018 China Family Panel Studies (CFPS) are analyzed using the bi-probit model. The results indicate that higher levels of household education and internet use significantly enhance the likelihood of accruing formal debt and weaken the tendency to engage in informal debt. This study innovatively employs the KZ index, traditionally used in corporate finance, to assess credit constraints at the household level. This new household credit constraint index demonstrates that the factors affecting the debt structure vary with the level of credit constraints, underscoring the complexity of household financial behaviors in China’s evolving credit landscape.

Household Debt and Housing: Source of Income Inequality in South Korea

ABSTRACT This study uncovers that the rising incidence of household debt, particularly being used for acquiring non-financial assets, correlates with a notable increase in income, predominantly benefitting high-income households. This trend is especially relevant in South Korea, where a significant portion of household debt is driven by the acquisition of non-financial assets such as houses. However, in the context of existing loan regulations, which prioritise macroprudential stability, the capacity to accrue substantial debt for non-financial assets is largely limited to high-income households. Consequently, this pattern aggravates income inequality as the analysis reveals that higher household debt balances are linked to positive income effects which are mostly available only to high-income households.

The Economic Impact Of The 1997 And 2008 Financial Crisis On Asia

This study investigates the factors that made Asian economies more resilient during the 2008 Global Financial Crisis (GFC) compared to the 1997 Asian Financial Crisis (AFC). The research addresses the question: What made Asian economies more resilient during the Global Financial Crisis than the Asian Financial Crisis? Through a comparative analysis, the research highlights the proactive reforms implemented after the AFC, such as the adoption of adaptable exchange rate regimes, enhanced banking supervision, and the development of deeper capital markets, which collectively fortified the region's financial systems. In this respect, it is observed that such reforms provided an enabling environment that, together with strong current account balances and large foreign exchange reserves, helped the Asian economies weather the GFC. The research has also attempted to explain how strategic international cooperation and financial policies updated were helpful in sustaining financial stability. Despite these successes, the research underscores ongoing vulnerabilities, such as high levels of corporate and household debt, that require attention to safeguard against future crises. The findings offer valuable insights into the importance of readiness, flexibility, and regional cooperation in ensuring economic stability and growth.

Introducing a Credit Bureau-Based Measure of U.S. Household Debt Service

Introducing a Credit Bureau-Based Measure of U.S. Household Debt Service

Managing the Discontent of the Losers Redux: A Future of Authoritarian Neoliberalism or Social Capitalism?

ABSTRACT: Neoliberalism eviscerated the value-sharing ethos of the postwar golden age (1945–1973), seeking to maintain social cohesion in civil society by "managing the discontent of the losers": reconciling working households to the realities of the neoliberal labor market by means of coercion, distraction, and debt accumulation (the last serving to limit the growth of consumption inequality in the face of burgeoning income inequality). The global financial crisis undermined the process of household debt accumulation, creating a crisis of neoliberal accumulation. Key to the institutional renewal required to address this crisis is managing the discontent of the losers inherited from the neoliberal era. One possibility is authoritarian neoliberalism, which involves amplification of the "coerce and distract" elements inherited from the previous regime. The alternative is social capitalism: a renewal of social democracy that eliminates the discontent of the losers and so reduces both the need and desire for illiberalism.

The Impact of Household Debt on Domestic Violence (DV) Against Children in Indonesia

Financial difficulties within a household could contribute to cases of domestic violence (DV). This study investigates the correlation between household debt and occurrences of domestic violence towards children in Indonesia. The study employs a quantitative methodology, notably utilising multinomial logistic regression analysis. Evidence suggests that households with several forms of debt are more prone to exhibiting both psychological and physical domestic violence against children, in contrast to households without domestic violence. This association maintains its significance even after taking into account control variables, such as the age of the spouse, the level of education of the head of home, the spouse's level of education, the size of the household, the perception of domestic violence, the schooling status of the children, and the age of the children are statistically associated with psychological, physical, and both types of domestic violence against children. Policymakers should assess household loan repayment capacity to limit lending to those at risk of financial struggle, while the government should implement parental education programs to raise awareness of child abuse and encourage non-violent parenting techniques.

The Role of Various Factors in Accumulation of Household Debt on OECD Countries

The Role of Various Factors in Accumulation of Household Debt on OECD Countries

Household Financial Fragility, Debt and Income in a Dynamic Model

AbstractWe develop a novel dynamic model for household debt and household income change studying the interaction between financial fragility and financial literacy. We compare the results to the U.S. data under several parameterizations. Households react pro-cyclically to income shocks and are better able to represent aggregate data when financial literacy is low.

Government expenditure and the housing puzzle: Unpacking mechanisms

Shocks in housing demand can trigger economic downturns, prompting governments to boost public consumption to mitigate its impact. The literature has found conflicting effects of government spending on residential investment and housing prices. We hypothesize that differences in the construction sector’s responses may be due to factors unaccounted for in the estimations, such as labor supply response to wage changes, labor reallocation between sectors, and the amount of household debt. Using a dynamic general equilibrium model, we demonstrate that government consumption boosts tradable goods production, resulting in increased labor demand and wages. However, this diverts workers away from construction, potentially deepening the wound in this sector. Specific labor market attributes and economic indebtedness can catalyze worker displacement from the construction sector, thus adversely affecting residential investment and overall credit. As a result, borrowers face considerable welfare losses. Redirecting government spending toward housing sustains residential activity while exacerbating the overall welfare decline. Our analysis provides plausible explanations for the disparate empirical evidence on the impact of government spending on the construction sector.

Household assets and business cycle fluctuations

AbstractThis paper shows that an increase in the ratio of household assets to gross domestic product (GDP) predicts higher GDP growth in the short term, but lower growth in the long term. It is also associated with lower consumption, investment, and employment rates in the future. The result is robust to controlling for various economic indicators including credit spreads, household debt to GDP ratio, and leverage ratio. Finally, we estimate a structural vector autoregressive model and find that an increase in the interest rate is associated with a decrease in the household assets to GDP ratio, in contrast to the findings of Galí and Gambetti (2015, American Economic Journal: Macroeconomics, 7(1), 233–257). This appears to support the conventional view of monetary policy.

Household finances, debt overhang and consumption patterns

This paper studies the effect of household debt on consumption throughout the business cycle. We use household-level data for Spain in a period, 2002–2017, characterized by significant fluctuations in leverage, consumption, and asset prices. We find that high levels of debt have a negative effect on consumption during recession periods, while previous debt accumulation does not significantly influence consumption. When considering heterogeneities across types of debt, we observe that households adjust their spending faster in response to debt not associated with real estate assets. By exploiting explicit information on household credit constraints, we find no evidence suggesting that they play a significant role in shaping the debt-consumption nexus. We conclude that in a situation of high leverage and financial stress, debt overhang decreases household consumption. In this context, policies aimed at preventing households from leveraging excessively during expansions, and policies providing debt relief during recessions, can help mitigate consumption shocks.

Households' Debts Among Rural and Agriculture-based Households in Indonesia

Household debts reflect financial insecurity for households to maintain their standard of living because it reflects the financial commitment that must be paid to other parties. However, the share of debts among different household classes, especially among agriculture and rural households in Indonesia still needs to be discovered. This research investigates the distribution of households’ debts in rural areas in Indonesia by utilizing data from the Indonesian Family Life Survey (IFLS) Wave 5 (2014). This research shows that households in rural areas have lower average debts than those in urban areas. At the same time, households in rural areas outside Java Island have higher average debts than their counterparts in Java Island. Two significant contributors to households’ debts are household size and household head educational attainment, where both variables show a positive and significant effect. The government must focus on rural development, including agricultural-based households, creating small but financially strong households, and increasing food self-sufficiency. Keywords: agriculture, debts, households, rural

Aging, low fertility and household debt risk

Population aging is a typical feature of the change of population age structure in many developed countries at present, and the resulting family economic burden is an important factor causing debt risk. This paper uses the sample data of 33 economies of the Bank for International Settlements (BIS) from 1992 to 2021 to study the impact of population age structure on household debt risk and its mechanism. The study found that: First, The rising proportion of the elderly population and the elderly dependency ratio have significantly increased the household debt levels, Population aging can increase the risk of household debt by affecting the pension level, total factor productivity and worker share; second, After the economy has suffered from economic fluctuations, The impact of population aging on household debt risk has changed from nonsignificant to positively significant, Show that the economic crisis has reduced household income levels, It weakens the family's solvency; third, With the relatively sound social security system in developed economies, Higher levels of national income, As a result, the aging population has a weak effect on household debt risk. Fourth, human capital investment can alleviate the negative impact of population aging to a certain extent. The reason is that the improvement of education level will improve the living conditions of families and enhance residents' awareness of independent old-age security. The conclusions of this paper have important policy implications for deeply exploring the social consequences of aging economy and reasonably YESling the spillover of household debt risk.

The invisible leverage of the rich. Absentee debtors and their hedge funds

The existing literature on finance, debt, and inequality depicts economic elites as a creditor class. According to a popular thesis, over the past four decades, the rich and ultra-rich households have experienced a saving glut (excess income), which they have invested in the debts of the poor and their governments. While it is undeniable that the rich have expanded their income share at the expenses of the poor, to refer to them as ‘creditors’ or ‘lenders’ is a misrepresentation of how they actually expand their wealth and income shares by financial means. For it conceals the fact that a great deal of their investments is leveraged, that is, carried out with borrowed money. This article shows that the debts generated for the sake of affluent households easily surpass those of all other households. However, these debts are not accounted for in statistics on household debt. This is because affluent households, particularly multi-millionaires and billionaires inside the top 1%, do not simply borrow from banks, like normal households do, but they are instead absentee debtors who borrow through corporate structures of which they are dominant shareholders and ultimate beneficiaries. To gain an insight into their invisible leverage, the article looks at how much hedge funds borrow and why their leverage matters.

Impact of Agriculture Market on the Socio-economic Aspects Farmers – A Study with Reference to Rythu Bazaars

The key challenges faced by smallholder farmers result from limited bargaining power and high transaction overheads, leading to poor economies of scale, high losses and limited price realisation due to inadequate infrastructure and poor quality control at the production clusters. Inefficiencies and lack of transparency in pricing, buyer discovery and supply chain inhibit a farmer from realising better prices. Small farmers are often excluded from accessing premium markets due to systemic barriers. Since, this paper aimed to study the impact of agriculture market on the socio-economic aspects farmers with reference to Rythu Bazaars, East Godavari district in Andhra Pradesh has taken study area and 6 Rythu Bazaars in it considered the study units. From each Rythu Bazaars 20 farmers were selected randomly and their perceptions were collected on impact of Rythu Bazaars on their socio-economic dimensions. Hence, the perceptions of farmers revealed that majority group felt impact more on their social status followed by household income and nutrition food habits. While three-fourth of the farmers felt impact of Rythu Bazaars showed to increase their household savings, above seventy percent opined that their financial status increased with the Rythu Bazaars. Moreover, a significant number of farmers felt Rythu Bazaars helped to clear their household debts, above sixty percent opined land holdings and household assets are increased with the help of Rythu Bazaars. Thus it is found that the overall impact of Rythu Bazaars on socio-economic aspects of the farmers found positive and increase their status.