Household Debt in OECD Countries: The Role of Supply-Side and Demand-Side Factors

Coletta, Massimo; Bonis, Riccardo De; Piermattei, Stefano

doi:10.1007/s11205-018-2024-y

Cited by 32 publications

(12 citation statements)

References 58 publications

(49 reference statements)

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“…A debt strain is commonly regarded as stress and depression factor (Gathergood 2012). Furthermore, a growing body of literature reports that the micro-level indebtedness can have serious implications for the macroeconomic financial stability (Mian et al 2017;Coletta et al 2019;Ramsay and Williams 2020). For this reason, we believe that monitoring overindebtedness is a necessity.…”

Section: Introductionmentioning

confidence: 97%

Over-indebted Households in Poland: Classification Tree Analysis

Wałęga

2020

Soc Indic Res

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Increasing a personal debt burden implies greater financial vulnerability and threats for macroeconomic stability. It also generates a risk of the households over-indebtedness. The assessment of over-indebtedness is conducted with the use of various objective and subjective measures based on the micro-level data. The aim of the study is to investigate over-indebted households in Poland using a unique dataset obtained from the CATI survey. We discuss and compare the usefulness of various over-indebtedness measures across different socio-economic characteristics. Due to the differences in over-indebtedness across single measures, we perform a more complex assessment using a mix of indicators. As an alternative to other commonly criticised over-indebtedness measures, we apply the “below the poverty line” (BPL) measure. In order to obtain the profile of over-indebted households, we use classification and regression tree analysis as an alternative to logit or probit models. We find that DSTI (“debt service to income”) ratio underestimates the extent of over-indebtedness in vulnerable groups of households in comparison with the BPL. We highlight the necessity to use different measures depending on the adopted definition of over-indebtedness. A psychological burden of debts is particularly strong among older and poorly educated respondents. We also find that the age structure of over-indebted households in Poland differs from this structure in countries with a broader access to consumer credits. Our results can be used to enrich the methods of assessing the household over-indebtedness.

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Section: Introductionmentioning

confidence: 97%

Over-indebted Households in Poland: Classification Tree Analysis

Wałęga

2020

Soc Indic Res

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“…OECD's household debt data mainly consists of home mortgage loans but also encompasses other types of liabilities such as credit lines, credit cards, and other consumer credit, including automobile loans or student loans. There is no agreement among scholars about the best way to measure household debt (Coletta, De Bonis, and Piermattei 2018). However, as shown in the literature review, some scholars like Prasad (2012) created customized measurements, preferring those which are close to consumer credit.…”

Section: Regression Analysis: Data and Hypothesismentioning

confidence: 99%

The impact of welfare on household debt

Comelli¹

2021

Sociological Spectrum

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This article aims to advance the theoretical understanding of how welfare affects household needs and willingness to take on debt across OECD countries. Previous sociological literature has attempted to explain indebtedness through the quantity of welfare spending, by searching for a tradeoff between the lack of welfare and the increase of household debt. Based on the "life cycle" hypothesis, according to which people take on debt when they are younger and pay it off as they age, this paper argues that divergence in household debt across countries is a function of the welfare state's orientation toward old-age provisions and the insider/outsider cleavage in the labor market. A welfare state that is generous toward the youth, facilitates the possibility for people to plan ahead in life and, by stabilizing financial expectations, makes people less risk averse. Higher debt ratios are more common in Northern countries as social protection is more extensive; while in continental countries, where welfare benefits are narrower and tend to target the already employed and the elderly, people are more riskaverse toward debt. The proposed theory is supported by an illustrative empirical analysis using data from the OECD SOCX, the Comparative Welfare Entitlements Dataset (CWED2) and the ECRI statistical package. Introduction: from a private trouble to a public issue Over the last 20 years, household debt relative to income has increased significantly in all Organization for Economic Cooperation and Development (OECD) countries, peaking around the 2007-2008 economic crisis. Since then, deleverage has been limited and, in many countries, household debt has continued to accumulate. Despite some common trends, the differences between countries remain significant. Before the crisis of 2008, household debt was considered a private trouble and received little sociological attention (Ritzer 2011). The crisis in the United States shifted the perception of household debt in the eyes of scholars and public institutions from a private to a public issue (Turner 2017). Personal debt has been seen as one of the leading causes of the crisis, not only because people were unable to repay their debts, but also because economic activity was absorbed in repaying any existing debts, thereby slashing growth (Jord a, Schularick, and Taylor 2015; Mian and Sufi 2015). Sociologists and political economists have begun investigating the relationship between credit and welfare spending. Many authors, especially Anglo-American scholars, argued that the rise of debt was the effect of welfare retrenchment or the lack of welfare protection (

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“…Industry stakeholders have been worried that the expanding indebtedness among microfinance (institutions' borrowers has become a developing issue in most of the countries including Tanzania, causing deterioration in borrowers' social and economic well-being, leading to poverty (Coletta et al, 2019;Ramsay & Williams, 2020). Further, over-indebtedness puts microfinance institutions' portfolio quality and institutional stability at risk, with outcomes spreading to investors, donors, and the industry as a whole (Kappel et al, 2010).…”

Section: Introductionmentioning

confidence: 99%

An assessment of over-indebtedness among microfinance institutions’ borrowers: The Tanzanian perspective

Kasoga

Tegambwage

2021

Cogent Business & Management

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The introduction of microfinance institutions is viewed as the best alternative source of financial services for low-income earners as a means to raise their income and reduce poverty. However, empirical research has indicated that the majority of microfinance institutions' borrowers are over-indebted. Overindebtedness has negative consequences for debtors, creditors, and for the economy as a whole. Since over-indebtedness is a context-specific phenomenon, it lacks universally accepted indicators. This study aims to validate indicators of overindebtedness and examine the situation of over-indebtedness among microborrowers in the context of Tanzania. A survey of 535 micro-borrowers was conducted using a semi-structured questionnaire. Descriptive, thematic, and logistic regression techniques were employed for data analysis. Findings show that debt-toincome ratio, multiple borrowing, and delinquency have a positive and significant effect on over-indebtedness. Further, findings indicate that over-indebted microborrowers in Tanzania spend 75% or more of monthly income on servicing debts; are in the state of delinquency; are unable to meet basic needs due to loan repayment expenditure, have three or more credit commitments, and are in delinquency. To reduce over-indebtedness and hence poverty among micro-borrowers,

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Household Debt in OECD Countries: The Role of Supply-Side and Demand-Side Factors

Cited by 32 publications

References 58 publications

Over-indebted Households in Poland: Classification Tree Analysis

Over-indebted Households in Poland: Classification Tree Analysis

The impact of welfare on household debt

An assessment of over-indebtedness among microfinance institutions’ borrowers: The Tanzanian perspective

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