The Increase in Household Debt and Borrowing Constraints (in Korean)

This paper empirically estimates the magnitude of borrowing constrained households in Korea, analyzes their characteristics, the determinants of the borrowing constraints and the effects of borrowing constraints on household consumption using the Korea Labor and Income Panel Study (KILPS). We define the borrowing constrained group as the households that have failed to obtain a loan within 2-3 years; and the insufficient borrowing group as the households that have not been able to borrow as much as they needed within 2-3 years. The KLIPS shows that about 10% of Korean households faced either borrowing constraint or insufficient borrowing. The proportion of the insufficient borrowing group is larger than that of the borrowing constraint group. The Multi-nomial Logit estimation results show that home ownership and a relative debt to asset ratio are the crucial determinants of both borrowing constraints and insufficient borrowing. Debt payment to income ratio also turns out to be one of the main determinants of borrowing constraints. Lastly, we examine the effects of borrowing constraints on household welfare. The estimation results suggest that both the borrowing constrained group and the insufficient borrowing group could not smooth their consumptions.