Household Debt and Social Interactions
AbstractDebt-induced crises, including the subprime crisis, are usually attributed exclusively to supply-side factors. We examine the role of social influences on debt culture, emanating from perceived average income of peers. Utilizing unique information from a household survey, representative of the Dutch population, that circumvents the issue of defining the social circle, we consider collateralized, consumer, and informal loans. We find robust social effects on borrowing - especially among those who consider themselves poorer than their peers - and on indebtedness, suggesting a link to financial distress. We employ a number of approaches to rule out spurious associations and to handle correlated effects.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9238.
Date of creation: Dec 2012
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Other versions of this item:
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-22 (All new papers)
- NEP-HME-2012-12-22 (Heterodox Microeconomics)
- NEP-IUE-2012-12-22 (Informal & Underground Economics)
- NEP-SOC-2012-12-22 (Social Norms & Social Capital)
- NEP-URE-2012-12-22 (Urban & Real Estate Economics)
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