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Book part
Publication date: 4 December 2018

Indranarain Ramlall

Abstract

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The Corporate, Real Estate, Household, Government and Non-Bank Financial Sectors Under Financial Stability
Type: Book
ISBN: 978-1-78756-837-2

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Article
Publication date: 8 April 2021

Robert Bednarzik, Andreas Kern and John Hisnanick

This paper aims to analyze the question of how household indebtedness impacts households’ incentives to search for and accept work after displacement.

Abstract

Purpose

This paper aims to analyze the question of how household indebtedness impacts households’ incentives to search for and accept work after displacement.

Design/methodology/approach

To analyze the relationship between household indebtedness and unemployment duration, this paper applies standard proportional hazard models. For data, this paper relies on the longitudinal US National Survey of Income and Program Participation (SIPP), covering the period between 2008 and 2012.

Findings

The findings show that a 10% increase in household debt increases the likelihood (hazard) of leaving unemployment by 0.2%–0.4% points. Independent of measuring a household's indebtedness and in light of a series of robustness tests, the results indicate that the pressure of servicing an existing debt burden forces individuals to return to work.

Social implications

From a policy perspective, the research findings support the notion that household indebtedness plays an important mediating role for labor market outcomes through influencing households’ incentives to return to work after displacement. This finding has important implications for the design of effective policy responses to mass layoffs during the current pandemic.

Originality/value

A key innovation of the research is that we can show that household indebtedness impacts the labor supply side. From a macroeconomic perspective, this insight is important in better understanding the role of increased indebtedness (and financialization) in amplifying aggregate macroeconomic dynamics.

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Journal of Financial Economic Policy, vol. 13 no. 5
Type: Research Article
ISSN: 1757-6385

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Article
Publication date: 29 April 2020

Bill Kolios

This paper aims to investigate the effect of labour market conditions and monetary policy on households' attitude towards debt in the Australian context.

Abstract

Purpose

This paper aims to investigate the effect of labour market conditions and monetary policy on households' attitude towards debt in the Australian context.

Design/methodology/approach

In doing so, household debt is categorised into housing, and consumer debt and the relationship is empirically tested through the use of a vector error correction model.

Findings

Consumer debt is found to be highly dependent on consumption with employment income and unemployment having a statistically insignificant effect, whilst monetary policy showing an inverse relation to consumer debt. The findings suggest that household consumption appears to be the primary determinant for consumer debt, which then behaves as a wage substitute. In terms of housing debt, income and monetary policy positively affect households' decisions with consumption and unemployment having a negative impact on the level of housing debt. The empirical results suggest that housing debt behaves as a proxy for household investment.

Originality/value

This paper empirically investigates the impact of selected macroeconomic variables on housing and personal debt separately. The findings suggest that monetary policy and labour market conditions have different impacts on the two separate debt types.

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Journal of Economic Studies, vol. 48 no. 1
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 6 November 2017

Lungile Ntsalaze and Sylvanus Ikhide

The purpose of this paper is to assess the existence of critical tipping points for explanatory variables (age, government grants, education and household size) – in…

Abstract

Purpose

The purpose of this paper is to assess the existence of critical tipping points for explanatory variables (age, government grants, education and household size) – in particular, household debt service-to-income on multidimensional poverty.

Design/methodology/approach

The paper applies a generalized additive model (GAM) using regression splines on National Income Dynamics Study data to establish threshold effects of the explanatory variables on multidimensional poverty.

Findings

The results show that the tipping point at which debt is associated with improved household welfare is 42.5 percent (level of debt service-to-income). With significant findings, household heads younger than 60 years of age and more children are associated with lower multidimensional poverty. Government grants may suffer from fungibility as they do not seem to be an effective tool for multidimensional poverty eradication. The ideal household size with negative significant correlation to multidimensional poverty is less than four members. And lastly, education proves to be the best instrument for households to escape multidimensional poverty.

Social implications

High household indebtedness is a severe social problem. Its effects include deteriorating physical and mental health, relationship difficulties and breakdown. Significant social costs arise such as medical treatment and indirectly, reduction of productivity. Further effects on society include rising criminal behavior, children dropping out of school thereby transferring poverty to succeeding generations. Non-performing loans increase and in turn lead to reduced credit availability. The overall health of the economy is impacted due to reduced aggregate demand.

Originality/value

Macro studies have demonstrated the presence of thresholds on debt analyses. However, such is not known in micro analyses, this paper attempts to bridge this knowledge gap by applying GAM for analysis of debt-poverty nexus at the micro level.

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International Journal of Social Economics, vol. 44 no. 11
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 21 September 2021

Sara Fernández-López, Djamila Daoudi and Lucía Rey-Ares

This paper aims to explore the linkage between households' social interactions and credit context and how these interactions may influence household borrowing decisions.

Abstract

Purpose

This paper aims to explore the linkage between households' social interactions and credit context and how these interactions may influence household borrowing decisions.

Design/methodology/approach

Based on a sample of 45,907 individuals referred to 18 countries, drawn from the Survey of Health, Ageing and Retirement in Europe, different probit regressions are used to test the four hypotheses proposed.

Findings

Empirical evidence confirms that intensive and extensive sociability are positively related to consumer debt holding. However, when social activities are considered separately, there is weak evidence that they are also related to mortgage debt holding and over-indebtedness. Moreover, at this level of analysis, the different nature of the social activities in which the individual participates in may condition the relationship with borrowing behaviour. The findings also show that relative income plays a passive role in household borrowing behaviour, since low-income households are more likely to hold mortgage and informal loans or to be over-indebted in highly indebted countries.

Originality/value

First, this paper extends the knowledge of the relationship between social interactions and borrowing behaviour by considering not only the intensity and diversity of the social activities in which the individual participates, but also the different nature of these activities. Second, it proposes that social interactions may play a passive role on borrowing decision, suggesting that household's behaviour might be passively affected by the density of borrowers surrounding it. To the best of our knowledge, there has not been any attempt to test this issue regarding household borrowing decisions. Third, unlike the few empirical papers on the topic, the paper also analyses previous issues by distinguishing between different types of debts; a distinction that revels the different role played by social interactions.

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International Journal of Bank Marketing, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0265-2323

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Book part
Publication date: 30 September 2014

Edward N. Wolff

I find that median wealth plummeted over the years 2007–2010, and by 2010 was at its lowest level since 1969. The inequality of net worth, after almost two decades of…

Abstract

I find that median wealth plummeted over the years 2007–2010, and by 2010 was at its lowest level since 1969. The inequality of net worth, after almost two decades of little movement, was up sharply from 2007 to 2010. Relative indebtedness continued to expand from 2007 to 2010, particularly for the middle class, though the proximate causes were declining net worth and income rather than an increase in absolute indebtedness. In fact, the average debt of the middle class actually fell in real terms by 25 percent. The sharp fall in median wealth and the rise in inequality in the late 2000s are traceable to the high leverage of middle-class families in 2007 and the high share of homes in their portfolio. The racial and ethnic disparity in wealth holdings, after remaining more or less stable from 1983 to 2007, widened considerably between 2007 and 2010. Hispanics, in particular, got hammered by the Great Recession in terms of net worth and net equity in their homes. Households under age 45 also got pummeled by the Great Recession, as their relative and absolute wealth declined sharply from 2007 to 2010.

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Economic Well-Being and Inequality: Papers from the Fifth ECINEQ Meeting
Type: Book
ISBN: 978-1-78350-556-2

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Book part
Publication date: 30 September 2014

Karina Doorley and Eva Sierminska

Using harmonized wealth data and a novel decomposition approach in this literature, we show that cohort effects exist in the income profiles of asset and debt portfolios…

Abstract

Using harmonized wealth data and a novel decomposition approach in this literature, we show that cohort effects exist in the income profiles of asset and debt portfolios for a sample of European countries, the United States, and Canada. We find that the association between household wealth portfolios at the intensive margin (the level of assets) and household characteristics is different from that found at the extensive margin (the decision to own). Characteristics explain most of the cross-country differences in asset and debt levels, except for housing wealth, which displays large unexplained differences for both the under-50 and over-50 populations. However, there are cohort differences in the drivers of wealth levels. We observe that younger households’ levels of wealth, given participation, may be more responsive to the institutional setting than mature households. Our findings have important implications, indicating a scope for policies which can promote or redirect investment in housing for both cohorts and which promote optimal portfolio allocation for mature households.

Details

Economic Well-Being and Inequality: Papers from the Fifth ECINEQ Meeting
Type: Book
ISBN: 978-1-78350-556-2

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Article
Publication date: 13 August 2018

Marco Terraneo

The purpose of this paper is to analyze whether and to what extent households living in southern Europe, i.e. Greece, Portugal, Spain and Italy, experience similar…

Abstract

Purpose

The purpose of this paper is to analyze whether and to what extent households living in southern Europe, i.e. Greece, Portugal, Spain and Italy, experience similar conditions of financial vulnerability, considering that in comparative research these countries are often grouped together because of the substantial instability of their economies and the similarity of social and welfare model.

Design/methodology/approach

The authors use data from Household Finance and Consumption Survey, a quite novel data set that covers the whole balance sheet of a sample of households. The authors compute four indicators of debt burden and in order to study households’ risk of default the authors apply two-part model, which is a valuable alternative to the application of conventional regression models with zero-inflated data.

Findings

Analysis reveals that the burden of debts and the risk of default are very different among the four countries, in particular Spain and Portugal have the highest proportion of financially vulnerable households.

Originality/value

The study is one a few that have directly compared objectives indicators of households’ financial vulnerability in all Southern European countries. Moreover, the authors employ a two-part model, a valuable alternative to the application of conventional logit or linear regression models. In the first part of the model the authors estimate the probability that households suffer financial vulnerability; in the second part, the authors estimate households’ level of vulnerability only for vulnerable families.

Details

Journal of Economic Studies, vol. 45 no. 3
Type: Research Article
ISSN: 0144-3585

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Book part
Publication date: 19 October 2016

Adrienne Roberts

The proliferation of homelessness and housing precariousness, along with a dramatic growth in food banks, are two signs that while parts of the UK economy may be…

Abstract

The proliferation of homelessness and housing precariousness, along with a dramatic growth in food banks, are two signs that while parts of the UK economy may be recovering from the 2008 financial crisis and recession, the same cannot be said for the living conditions of much of the poor and working class population. Much of the media discussion has centered on the ways in which these social ills have been caused by government policy, particularly cuts to social and welfare services introduced under the banner of “austerity.” I argue in this paper, however, that a narrow focus on austerity risks obscuring some of the longer-term structural transformations that have taken place under neoliberal capitalism, namely: (1) financialization and (2) the privatization of social reproduction. Situating these two trends within a longer history of capitalism, I argue, allows us to understand the contemporary housing and food crises as specific (and highly gendered) manifestations of a more fundamental contradiction between capital accumulation and progressive and sustainable forms of social reproduction. Doing so further helps to locate the dramatic proliferation of household debt, which has been supported by both processes, as both cause and consequence of the crisis in social reproduction faced by many UK households.

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Risking Capitalism
Type: Book
ISBN: 978-1-78635-235-4

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Article
Publication date: 28 January 2014

Jing Jian Xiao and Rui Yao

The purpose of this paper is to document debt delinquency patterns by family lifecycle categories using multiple data sets that are nationally representative of American…

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Abstract

Purpose

The purpose of this paper is to document debt delinquency patterns by family lifecycle categories using multiple data sets that are nationally representative of American families.

Design/methodology/approach

Based on previous research, 15 lifecycle categories appropriate for American families are defined by household head's age, marital status, presence of children, and age of children. Data used are from Surveys of Consumer Finances (SCF) in the USA in 1992-2010. Multiple logistic regressions are conducted to identify probabilities of debt delinquencies of families in various lifecycle categories by controlling for income, financial assets, holdings of several types of debt, and several other demographic and socioeconomic variables.

Findings

The results show that among the 15 household lifecycle categories, the top three most likely to be delinquent are young couples with children aged seven or older, middle-aged singles with children aged 15 or older, and middle-aged singles with children under 15. Younger households are more financially distressed than their older counterparts. Presence of children increases the probability of debt delinquency.

Research limitations/implications

In this study, multiple national data sets representing American families are used to document debt delinquency patterns by family lifecycle categories. Results shed light on this important topic and offer helpful information for both banking industry practitioners and consumer financial educators.

Practical implications

The information produced by this study can help bank managers better identify their potential clients and understand their current customers. Different marketing strategies based on the research findings can be developed to attract and retain customers with different delinquency risks.

Originality/value

This is the first study to examine debt delinquencies by family lifecycle categories with multiple SCF data sets in the USA. The 15 family lifecycle categories used are based on recent research that is specially designed for American families. The research findings provide straightforward implications for both bank managers and consumer educators.

Details

International Journal of Bank Marketing, vol. 32 no. 1
Type: Research Article
ISSN: 0265-2323

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