Rising Household Debt Research Articles

E-coaching systems and social justice: ethical concerns about inequality, coercion, and stigmatization

AbstractPoor self-regulation has been linked to various behaviors that contribute to pressing societal issues, including rising household debt, inefficient use of sustainable resources, and increasing healthcare demands. In light of this observation, the prospect of individuals receiving automated, tailored support by “e-coaching systems” to scaffold and improve their self-regulation is thought to hold promise for making society-wide progress in addressing such issues. Though there may be legitimate reasons for promoting the use of such systems, and individuals might welcome the support, our aim in the present article is to contribute to the ethics of e-coaching by showing how societal pressures towards the widespread adoption of automated e-coaching systems raise concerns in relation to three distinct aspects of social justice. We argue that societal inequalities may be introduced or exacerbated by (1) unequal access to the technologies, (2) unequally distributed restrictions to liberty and subjection to coercion, and (3) the potentially disparate impact of the use of e-coaching technologies on (self-)stigmatizing perceptions of competence. The article offers a research agenda for studying and addressing these concerns.

The Rise of Household Debt in Global Economy and Türkiye

The Rise of Household Debt in Global Economy and Türkiye

Bringing Household Finance Back In: House Prices and the Missing Macroeconomics of Comparative Political Economy

This article makes a key contribution to the comparative political economy literature by accounting for the macroeconomic role of household finance. Based on post-Keynesian theories of finance and the financialization literature, we place house prices and mortgage credit squarely at the center of the macroeconomy, as speculative house price cycles can facilitate homeowner consumption via the use of equity release mortgages. Through an econometric evaluation of eighteen advanced economies from 1980 to 2019, we demonstrate that household debt is determined by house price inflation, and that rising household debt contributes to GDP growth, while business debt has negative growth effects. These results are consistent across countries with different growth models and financial systems. This suggests that the varieties of capitalism's focus on corporate finance is misplaced and that the growth models approach needs a theory of house prices, mortgage credit, and financial cycles to adequately conceptualize how debt-driven growth operates across advanced economies.

Income Inequality, Household Debt, and Consumption Growth in the United States

In this paper, the SV-TVP-VAR model is used to study the relationships between income inequality, household debt, and consumption growth in the US. This is of great significance for studying whether household debt can become a “substitute” for income and whether it is possible to achieve sustainable growth in consumption under the background of worsening income inequality. According to the research results, the main conclusions are as follows: Firstly, the widening of income inequality would increase consumption in the short term but restrain consumption in the medium and long term, as the relationship between them would turn from positive to negative. Secondly, household debt could improve consumption in the short term but reduce consumption in the medium and long term, with long-term effects being greater than medium-term effects, which means that the long-term negative impact of US household debt on household consumption would be persistent. Lastly, widening income inequality has led to rising household debt over different maturities.

The Electoral Consequences of Household Indebtedness under Austerity

AbstractWhat are the political consequences of rising household debt in the context of fiscal austerity? I argue that cuts in welfare benefits privatize social obligations as voters address ensuing financial shortfalls by borrowing money. Debt re‐commodifies individuals and shifts their electoral support from incumbents to opposition and anti‐establishment parties by provoking feelings of political neglect, economic vulnerability, and strong emotional responses. I examine this argument by leveraging spatial and temporal variation in the rollout of Universal Credit (UC), a large‐scale welfare reform in the United Kingdom. Using fine‐grained administrative data on unsecured debt, I demonstrate that fiscal austerity generated an increase in indebtedness, which lowered support for the incumbent Conservatives and strengthened support for Labour and the UK Independence Party (UKIP). I then use individual‐level survey data to explore the mechanisms that link debt and political behavior. The results suggest that rising indebtedness increases the political costs of welfare retrenchment and creates new political cleavages.

Class and Vulnerability to Debt in Rural India: A Statistical Overview*

AbstractRural indebtedness is a major development challenge confronting India. In 2018, scores of farmers protested rising household debt, and the popular coverage of the time asserted that farmers were under crushing debt. Combining data from the All‐India Debt and Investment Survey with other sources and using a class analysis, I interrogate this “crushing debt” narrative. Rural households, depending on the socioeconomic and contextual vulnerabilities that they experience, are indebted in different ways. The rural elite borrow more loans and have higher loan amounts, while asset‐poor households are more dependent on informal credit sources and also pay higher rates of interest. Households from the wage worker class are more likely to be over‐indebted relative to others. I further find that petty commodity producers bear less debt burden and are less likely to be over‐indebted relative to other classes. These findings underscore the fact that rural indebtedness is a nuanced problem that manifests in a multitude of ways across India.

Australians’ Financial Wellbeing and Household Debt: A Panel Analysis

“An excess of everything is bad”. This famous old proverb fits well with the current condition of Australian household debt that is continuously rising. Research in Australia’s household indebtedness is scarce and strategies to control the rising household debt remain contentious. The government of Australia has introduced financial literacy and financial capability measures to help control the rising household debt. Given that the literature highlights the importance of improving financial wellbeing, we analyse if financial wellbeing is a factor, which could be relevant to the reduced household debt. We use the Household, Income and Labour Dynamics in Australia panel survey in our analysis and find that improved financial wellbeing is associated with the reduced debt-taking behaviour of Australians. Our robust analysis confirms our findings. Finally, our empirical results suggest that improving households’ perception of their personal financial situation can bring improvement in their financial decisions, including the decision to take on debt.

Low Interest Rates and the Distribution of Household Debt

We study how changes in interest rates affect the borrowing of households and the distribution of debt within the population. In a model of household borrowing with credit constraints and endogenous house prices, we show that less constrained households with more pre-existing housing wealth increase their borrowing most when interest rates fall. We then use unique loan level data on the universe of household credit in Belgium to document a shift in the distribution of debt over age, with older households borrowing more as interest rates fell in the last decade. First-time borrowers, who are more likely to be constrained, do not contribute to the rise in household debt. To identify the elasticity of household debt to the interest rate, we use regulatory data on foreign exposures of banks and on the location of bank branches. We find that a 1 percentage point fall in the interest rate is associated with a 15% growth in household debt.

The Political Economy of Household Debt & The Keynesian Policy Paradigm

ABSTRACT Britain is an exemplar of a financialised economy that developed systems of household debt to drive economic growth from the 1980s onwards. The prevailing critical and constructivist accounts consider this development as a key feature distinguishing neoliberalism from Keynesianism. We challenge these prevailing accounts for insufficiently acknowledging the socio-political motivations and consequences of a significant rise in household debt from 1945 under Keynesianism. Synthesising the policy paradigm and Neo-Weberian approaches, we assess the socio-political purposes encoded within the rise in household debt throughout the Keynesian era. Our results demonstrate that household debt was regularly relaxed and restricted by Conservative and Labour governments in line with Keynesian economic ideas. Subsequently, we argue that the deproletarianising and conservatizing effects of household debt shifted voter preferences to the right, which influenced political party policies. The Heath government capitalised on this political shift by liberalising the financial sector and removing state-directed controls on the economy, establishing a distinct break from Keynesian demand management. We argue that the punctuated diffusion and evolution of household debt throughout the Keynesian era laid the social, political and economic foundations for the debt-driven growth model to develop in the 1980s.

It takes two to tango: mortgage markets, labor markets and rising household debt in Europe

Household mortgage debt unleashed devastating consequences for the global economy in 2007–2008. Despite the growing importance of household debt in financial markets, international political economy and comparative political economy have not theorized why it varies so much across Europe. We argue that variation in household debt can be explained by the intersection of two domestic institutions: labor market institutions (and by extension the welfare state) that enable households to withstand negative employment/income shocks, and mortgage finance institutions that govern households’ credit access. We empirically demonstrate via a panel analysis of 17 advanced capitalist democracies that the impact of these institutions on household debt is co-dependent. Strong collective bargaining institutions (and generous welfare states), which protect borrowers from income and employment insecurity, are associated with higher household indebtedness, but only if housing finance institutions that encourage mortgage lending are present (i.e. in Scandinavia and the Netherlands). In contrast, liberal (financialized) economies have comparatively lower household indebtedness because their labor market institutions inhibit income security for borrowers. As household debt becomes more central to comparative political economy, our findings suggest that scholars who study financialization need to integrate labor market (and welfare state) institutions into their analysis to understand how domestic financial systems function.

China’s Rising Household Debt: A New Debt Trap?

Household debt in China has risen rapidly in recent years, mostly driven by mortgages but also by ongoing financial deepening and liberalisation which facilitate economic rebalancing towards more consumption. Although the risks to financial stability do not seem large at the time of writing, the sharp rise in household debt has raised some concerns, as high household borrowing could increase macro-financial risks, particularly given the US-China trade tensions and the ongoing coronavirus pandemic that has resulted in weaker employment and export market. Rising household debt will add to medium- to long-term challenges for China’s domestic consumption and the financial sector. The authorities have so far implemented measures to lessen the risk of a sharp housing correction in the short-run.

Determinants of household debt in emerging economies: A macro panel analysis

A rapid increase in household debt is undeniably a main concern among policymakers. Studies indicating the damaging effect of rapid rise in household debt towards economic growth attracted many researchers to determine its reasons. The risk from high household debt is not only applicable to advanced economies, but also inherent in emerging economies. Thus, the present study examines the leading causes of household debt in emerging economies. The study employs a bias-corrected least square dummy variable for the period of 1995–2018. The results show positive and significant effects of financial development, house prices, and lending interest rate. Meanwhile, unemployment rate and inflation are negatively associated with household debt. The study therefore urges policymakers, relevant authority and financial institutions to employ suitable and effective policy to mitigate the factors identified in the rise of household debt.

The Saving Glut of the Rich and the Rise in Household Debt

The Saving Glut of the Rich and the Rise in Household Debt

Is Rising Household Debt Affecting Retirement Decisions?

Is Rising Household Debt Affecting Retirement Decisions?

The Thinning of Social Ties: Electoral Consequences of Indebtedness under Austerity

What are the political consequences of rising household debt in the context of fiscal austerity? As governments scale back the welfare state, many voters address ensuing financial shortfalls by borrowing money. I argue that debt individualizes and undermines turnout and support for incumbents by triggering feelings of political neglect, breeding anger and resentment, and weakening social ties that are necessary for political engagement. I examine this argument by leveraging spatial and temporal variation in the rollout of Universal Credit, a large-scale welfare reform in the United Kingdom. Using fine-grained administrative data on unsecured debt, I demonstrate that fiscal austerity generated an increase in indebtedness and lowered voter turnout and support for the Conservatives. I then use individual-level survey data to explore the mechanisms that link debt and political behavior. The results suggest that rising indebtedness de-mobilizes voters, which reduces the political costs of welfare retrenchment but creates new political cleavages.

Assessing Macro-Financial Risks of Household Debt in China

High household indebtedness could constrain future consumption growth and increase financial stability risks. This paper uses household survey data to analyze both macroeconomic and finanical stability risks from the rapidly rising household debt in China. We find that rising household indebtedness could boost consumption in the short term, while reducing it in the medium-to-long term. By stress testing households’ debt repayment capacity, we find that low-income households are most vulnerable to adverse income shocks which could lead to signficant defaults. Containing these risks would call for a strengthening of systemic risk assessment and macroprudential policies of the household sector. Other policies include improving the credit registry system and establishing a well-functioning personal insolvency framework.

Is Rising Household Debt Affecting Retirement Decisions?

Household debt among older Americans approaching retirement has increased dramatically over the past couple of decades. Older households have become increasingly more indebted and more leveraged. While mortgages remain the predominant type of debt among households in their 50s and 60s, in recent years, student loan debt has also risen among these households. Using household survey data to examine how late life debt affects retirement decisions, we find that more indebted older adults are more likely to work, less likely to be retired, and on average expect to work longer than those with less debt.

Rising Household Debt and Children's Socioemotional Well-being Trajectories.

Debt is now a substantial aspect of family finances. Yet, research on how household debt is linked with child development has been limited. We use data from the National Longitudinal Survey of Youth 1979 cohort and hierarchical linear models to estimate associations of amounts and types of parental debt (home, education, auto, unsecured/uncollateralized) with child socioemotional well-being. We find that unsecured debt is associated with growth in child behavior problems, whereas this is not the case for other forms of debt. Moreover, the association of unsecured debt with child behavior problems varies by child age and socioeconomic status, with younger children and children from less-advantaged families experiencing larger associations of unsecured debt with greater behavior problems.

The new politics of debt in the transition economy of Vietnam

This study reviews the rising household debt and nonfinancial corporation debt in Vietnam, a socialist-oriented, lower middle-income emerging economy. Vietnam has made huge strides in economic growth within three decades of reforms, lifting millions of people out of poverty thanks to better access to credit. At the same time, there are lending and borrowing practices that signal troubles ahead. Based on a thorough examination of the theoretical literature on indebtedness, the study sets out to identify the drivers of borrowing and over-borrowing in Vietnam in recent years. Particularly, the abundant financial and physical resources have given rise to consumerism and the boom of the super-rich. These are two of the four factors that have shifted Vietnamese culture from one that traditionally condemned debt as a vice to one that now tolerates indebtedness. The other two factors can be found at the corporate level where there is an over-reliance on debt financing and rampant rent-seeking. Here, a kind of ‘resource curse’ threatens sustainable corporate growth – businesses rely too much on borrowing to fuel their operations, but in fact are overlooking the innovation factor. The new politics of debt, we suggest, have created a toxically pro-consumption, debt-tolerant society.

Assessing Macro-Financial Risks of Household Debt in China

High household indebtedness could constrain future consumption growth and increase financial stability risks. This paper uses household survey data to analyze both macroeconomic and finanical stability risks from the rapidly rising household debt in China. We find that rising household indebtedness could boost consumption in the short term, while reducing it in the medium-to-long term. By stress testing households' debt repayment capacity, we find that low-income households are most vulnerable to adverse income shocks which could lead to signficant defaults. Containing these risks would call for a strengthening of systemic risk assessment and macroprudential policies of the household sector. Other policies include improving the credit registry system and establishing a well-functioning personal insolvency framework.