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The impact of unsecured debt on financial distress among British households

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  • Ana Del-Rí­o
  • Garry Young

Abstract

This paper uses evidence from the British Household Panel Survey (BHPS) to examine how attitudes towards unsecured debt are related to household finances and other characteristics. An ordered-logit model is estimated for 1995 and 2000 using a self-reported indicator of financial distress as the dependent variable. This analysis suggests that the main factors causing debt problems are the unsecured debt-income ratio, the level of mortgage income gearing, the level of financial wealth of households, their health, ethnicity and marital status. While the proportion of households reporting debt problems did not change between 1995 and 2000, there were important shifts among different groups. In particular, more households in the youngest age group reported debt repayments were a heavy burden in 2000, while the opposite applies to the oldest age group where a smaller proportion of households than in 1995 reported debt was a heavy burden. These changes can largely be accounted for by the changing economic circumstances of these groups rather than an unrelated shift in attitudes. In particular, the increase in indebtedness of the young was the main factor accounting for their greater tendency to report debt problems.

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Bibliographic Info

Paper provided by Bank of England in its series Bank of England working papers with number 262.

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Date of creation: May 2005
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Handle: RePEc:boe:boeewp:262

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  1. Ana del Rio & Garry Young, 2006. "The determinants of unsecured borrowing: evidence from the BHPS," Applied Financial Economics, Taylor & Francis Journals, vol. 16(15), pages 1119-1144.
  2. Dolado, Juan José & Jansen, Marcel & Jimeno, Juan F., 2005. "Dual Employment Protection Legislation: A Framework for Analysis," IZA Discussion Papers 1564, Institute for the Study of Labor (IZA).
  3. Javier Andres & J. David López-Salido & Edward Nelson, 2004. "Tobin's imperfect asset substitution in optimizing general equilibrium," Working Papers 2004-003, Federal Reserve Bank of St. Louis.
  4. Robert-Paul Berben & Alberto Locarno & Julian Morgan & Javier Vallés, 2005. "Cross-country differences in monetary policy transmission," Banco de Espa�a Working Papers 0502, Banco de Espa�a.
  5. Canova, Fabio & Ciccarelli, Matteo & Ortega, Eva, 2007. "Similarities and convergence in G-7 cycles," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 850-878, April.
  6. Buisan, Ana & Caballero, Juan C. & Campa, Jose M. & Jimenez, Noelia, 2004. "La importancia de la histéresis en las exportaciones de manufacturas de los países de la UEM," IESE Research Papers D/561, IESE Business School.
  7. Camacho, Maximo & Pérez-Quirós, Gabriel, 2005. "Jump-and-Rest Effects of US Business Cycles," CEPR Discussion Papers 4975, C.E.P.R. Discussion Papers.
  8. Böheim, René & Taylor, Mark P., 2000. "My home was my castle: evictions and repossessions in Britain," ISER Working Paper Series 2000-04, Institute for Social and Economic Research.
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Cited by:
  1. Luis J. Álvarez & Emmanuel Dhyne & Marco Hoeberichts & Claudia Kwapil & Hervé Le Bihan & Patrick Lünnemann & Fernando Martins & Roberto Sabbatini & Harald Stahl & Philip Vermeulen & Jouko Vilmunen, 2006. "Sticky Prices in the Euro Area: A Summary of New Micro-Evidence," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 575-584, 04-05.
  2. Georgarakos, Dimitris & Lojschova, Adriana & Ward-Warmedinger, Melanie E., 2009. "Mortgage Indebtedness and Household Financial Distress," IZA Discussion Papers 4631, Institute for the Study of Labor (IZA).
  3. Meral Karasulu, 2008. "StressTesting Household Debt in Korea," IMF Working Papers 08/255, International Monetary Fund.
  4. Adela Luque, 2005. "Skill mix and technology in Spain: evidence from firm level data," Banco de Espa�a Working Papers 0513, Banco de Espa�a.
  5. Herrala, Risto & Kauko, Karlo, 2007. "Household loan loss risk in Finland – estimations and simulations with micro data," Research Discussion Papers 5/2007, Bank of Finland.
  6. Ana Del-Rí­o & Garry Young, 2005. "The determinants of unsecured borrowing: evidence from the British Household Panel Survey," Bank of England working papers 263, Bank of England.
  7. Schicks, Jessica, 2014. "Over-Indebtedness in Microfinance – An Empirical Analysis of Related Factors on the Borrower Level," World Development, Elsevier, vol. 54(C), pages 301-324.
  8. Jessica Schicks, 2010. "Microfinance Over-Indebtedness: Understanding its drivers and challenging the common myths," Working Papers CEB 10-048, ULB -- Universite Libre de Bruxelles.
  9. Matthias Keese, 2009. "Triggers and Determinants of Severe Household Indebtedness in Germany," SOEPpapers on Multidisciplinary Panel Data Research 239, DIW Berlin, The German Socio-Economic Panel (SOEP).
  10. Matthias Keese, 2009. "Triggers and Determinants of Severe Household Indebtedness in Germany," Ruhr Economic Papers 0150, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  11. Khandker, Shahidur R. & Faruqee, Rashid & Samad, Hussain A., 2013. "Are microcredit borrowers in Bangladesh over-indebted ?," Policy Research Working Paper Series 6574, The World Bank.
  12. Matthias Keese, 2010. "Who Feels Constrained by High Debt Burdens? – Subjective vs. Objective Measures of Household Indebtedness," Ruhr Economic Papers 0169, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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