We examine the impact of overdue debts in small villages in one of Hungary’s most disadvantaged regions. We find that a significant number of debtors with overdue debts permanently escape from debt collectors. Accordingly, in our sample, overdue debts reduce the likelihood of declared work by 14 percentage points on average. The lack of declared work alone reduces the probability of opening a bank account by 21 percentage points, and overdue debts further reduce it by 9 percentage points. The negative effect of overdue debts on health is almost as large as the positive effect of a high school diploma. In addition, the health-destroying effect extends not only to the debtor but to all members of the household. Therefore, overdue debts create a poverty trap mechanism exacerbating financial exclusion, hence resulting in significant losses for both the individual and society. We recommend paying more attention to smoothing credit cycles and resolving non-performing debt obligations.

Berlinger edina-doBránszKy-Bartus Katalinmolnár györgy lejárt tartozások fogságában Mélyinterjúkkal és célzott kérdőíves felméréssel vizsgáltuk, hogyan hatnak a lejárt tartozások a munkavállalásra, a bankszámlahasználatra és az egészségi állapotra Magyarország egyik legelmaradottabb térségében, ahol még a Covid-válságot megelőző, prosperáló időszakban is sokan éltek pénzügyi kirekesztettségben. Azt találtuk, hogy a büntetőkamatokkal megnövelt, reménytelen nagyságúvá eszkalálódott tartozások miatt sokan arra rendezkedtek be, hogy bujkálnak a behajtás elől: nem vállalnak bejelentett munkát, nem nyitnak bankszámlát, és emiatt folyamatos stresszel kénytelenek együtt élni. A lejárt tartozások így egyfajta szegénységicsapda-mechanizmust hoznak létre, és számottevő jóléti veszteségeket okoznak egyéni és társadalmi szinten egyaránt. A döntéshozóknak nagyobb figyelmet kellene fordítaniuk a hitelciklusok tompítására, illetve a kialakult nemteljesítő adósságok rendezésére, különösen ebben a törékeny társadalmi csoportban.* Journal of Economic Literature (JEL) kód: G51, G53, I38.

In our research, we aim to shed light on the role of overdue debt in reinforcing poverty. This not only helps to better understand the dynamics of poverty trap induced by overdue debt but also enhances the rediscussing of current policy tools. Our research is based on data collected with targeted questionnaires in March and April 2019 by the Soreco Research Kft. Data were recorded with a personal question and answer method, by a so-called multi-stage stratified random sampling procedure. The data collection was anonymised and focused on the financial and liquidity decisions of households in small settlements in one of the most disadvantaged counties of Hungary, Borsod-Abaúj-Zemplén (BAZ) county. The sample is representative on the level of households living in small settlements. After cleaning the raw data, we have information from 504 households and 1794 individuals. 1196 individuals are of legal age, from whom 179 had overdue debt. We develop a theoretical model inspired by Akerlof (1978), Tirole (2006), and Mukherjee, Subramanian, Tantri (2019) to derive a feasibility condition for market-based debt relief programs. Our empirical analysis aims at investigating the role of overdue debt in creating poverty trap. With the help of statistical analysis and linear probability models we examine the impact of overdue debt on employment, on having a bank account, and on mental- and physical- health based on targeted questionnaires and in-depth interviews in the most disadvantaged regions of Hungary. We controlled for socioeconomic factors (e.g., gender, age, education level, ability to pay) and for settlement and county development indicators. In these regions, a significant part of the society has been the victim of financial exclusion well before the Covid 19 crisis, even under prospering economic conditions. Results: § The theoretical model shows that lenders have no interest to offer payment reductions if non-performing borrowers are few, have small debts, and are difficult to reach. In this situation, poor debtors serve better as deterrents, similarly if we put them into a pillory. § Calibrating model parameters to poor households struggling with overdue debts, we show that this might be the case on our sample, too. § As, in normal economic circumstances, private debt relief programs are typically not feasible, a state subsidy would be needed to consolidate the debts of the poor. State intervention can be justified both by positive externalities and moral considerations. § We find that many borrowers hide from debt collection as a consequence of overdue debt that has escalated to an unbearable level due to penalty rates. These borrowers are following the hiding strategy and take their decisions accordingly: to avoid deductions, they do not apply for registered jobs, do not open bank accounts and consequently, they are forced to live under constant stress. § To sum up the impact of overdue debt on social inclusion factors and according to our estimations, overdue debts reduce the likelihood of having a registered job by nearly 14 percentage points. Not having a registered job reduces the probability of owning a bank account by 22 percentage points and, in addition, overdue debts further decrease the probability by 5 percentage points. In addition, overdue debt also has a negative effect on the health of those living in the same household as the debtor, and this negative effect is greater than what a combined high school diploma and diploma could compensate for (0.4 versus 1.08-0.72 = 0.36). § Overdue debt, therefore, leads to a certain type of debt-trap mechanism resulting in significant loss for both the individual and the society. In this light, policy makers should pay more attention to addressing credit cycles and resolving non-performing debt obligations, especially in this fragile part of the society.

In this article, we look at the Taxonomy Regulation, which entered into force in June 2020. We describe the requirements for investments and listed companies to have their economic activities labelled green, conditional on not violating safe-guards against doing significant harm to social or human rights. We find that the Taxonomy Regulation is a hybrid regulation, which aims at influencing business activities through regulation of financial services. The relevance of this article for finance research is not least to make clear the bias, or research premise, that will be introduced into any quantitative research on green premiums (the so-called greemiums) of EU financial services and listed shares and bonds after 1 January 2022, when the technical screening criteria of the Taxonomy Regulation enter into force and complete the definition of what con-stitutes sustainable or green economic activity. To a large extent, this will serve to make cross-European comparisons of greemiums (green premiums) easier as data on what is green will be based on European standards. Others might argue that legislating a definition of what is considered green or sustainable should be left to the market, for better or worse.

Cikkünk központi témája az EU-nak az ez év júliusában hatályba lépett taxonómiai rendelete. Bemutatjuk a fenti rendelet által lefektetett és a befektetési tevékenységekre, illetve a tőzsdén jegyzett társaságokra vonatkozó azon szabályokat, amelyek meghatározzák, milyen feltételek mellett minősíthető az általuk érintett gazdasági tevékenység zöldnek, vagyis fenntarthatónak környezetvédelmi szempontból. A zöld minősítés feltétele, hogy a szintén ebben a rendeletben meghatározott, egyéb környezetvédelmi, társadalmi és emberi jogi biztosítékoknak eleget tegyenek. Elemzésünk során megállapítottuk, hogy a taxonómiai rendelet hibrid jogi szabályozást eredményezett abban az értelemben, hogy bár a rendelet maga közvetlenül a pénzügyi szolgáltatásokat szabályozza, közvetett célja az üzleti tevékenységek pénzügyi forrásokon keresztül történő befolyásolása. Cikkünk – nem utolsó sorban – alapot nyújt arra, hogy a 2022. január 1-je, vagyis a taxonómiai rendelet meghatározását kiegészítő szakmai átvilágítási kritériumok életbe lépése után az EU pénzügyi szolgáltatásainak, valamint a tőzsdén jegyzett részvényeknek és kötvényeknek a zöld prémiumaival (úgynevezett greemium) kapcsolatos, bármilyen kvantitatív kutatása során a zöld tevékenység definíciójából adódó kutatási előfeltevéseket tisztázzuk, és ezzel a kutatási torzításokat csökkentsük. Ez nagymértékben megkönnyíti majd a greemium európai össze-hasonlítását, mivel annak a meghatározása, hogy mely gazdasági tevékenységet tekintjük zöldnek, európai szabványokon alapul. Megjegyeznénk, hogy felmerülhetnek olyan érvelések, amelyek szerint ezt a meghatározást a piacra kell bízni, annak minden előnyével és hátrányával.