IDEAS home Printed from https://ideas.repec.org/a/umk/journl/v9y2017i1p1-19.html
   My bibliography  Save this article

Does Income Gap Matter for Household Debt Accumulation?

Author

Listed:
  • Mohd Afzanizam Abdul Rashid

    (Faculty of Economics and Management, Universiti Kebangsaan Malaysia)

  • Tamat Sarmidi

    (Faculty of Economics and Management, Universiti Kebangsaan Malaysia)

  • Abu Hassan Shaari Md Nor

    (Faculty of Economics and Management, Universiti Kebangsaan Malaysia)

  • Nor Ghani Md Noor

    (Faculty of Economics and Management, Universiti Kebangsaan Malaysia)

Abstract

The rise in household debt raises the question: what really causes people to take on more debt when they have to serve the cost of borrowings for the rest of their lives? It appears that households are willing to trade their financial freedom for something that is more precious at a time when the gap between the rich and the poor is widening. In this regards, our main objective is to investigate the relationship between household debt and income gap. The understanding of this issue may give good insights as to how household would make decisions to leverage their balance sheet. This is particularly true in the context of “keeping up with the Jones’s” which provides the theoretical framework of such phenomenon while greater access to credit would facilitate the process. In this research, the Generalized Methods of Moments (GMM) technique is employed for 55 countries and covers the period from 2000 to 2012. The results showed that there is a significant positive relationship between income gap and household debt. In addition, the level of indebtedness is deemed to be persistent throughout our sample countries, suggesting that households will remain in debt-trap.

Suggested Citation

  • Mohd Afzanizam Abdul Rashid & Tamat Sarmidi & Abu Hassan Shaari Md Nor & Nor Ghani Md Noor, 2017. "Does Income Gap Matter for Household Debt Accumulation?," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 9(1), pages 1-19, January.
    • Handle: RePEc:umk:journl:v:9:y:2017:i:1:p:1-19
    as

    Download full text from publisher

    File URL: http://ijie.um.edu.my/filebank/published_article/10852/Does%20Income%20Gap%20Matter%20for%20Household%20Debt%20Accumulation.docx.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Conspicuous; consumption and social interactions; credit ratio; household debt; income gap;
    All these keywords.

    JEL classification:

    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:umk:journl:v:9:y:2017:i:1:p:1-19. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Teoh Wern Jun (email available below). General contact details of provider: https://edirc.repec.org/data/feaummy.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.