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US and European Household Debt and Credit Constraints

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Author Info
Jonathan Crook () (University of Edinburgh)
Stefan Hochguertel () (VU University Amsterdam)

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Abstract

This paper uses micro data from four OECD countries (the United States, Spain, Italy, and the Netherlands), to assess the determinants of household debt holding and to investigate whether or not credit constraints are important for household debt holding. We extend the existing literature in important ways. First, we present comparative evidence for four countries at the micro level, where we rely on household panel data for two countries; we are thus able to control for unobserved heterogeneity via individual household effects and to track changes in household behaviour over time. Second, by making data across countries as comparable as possible, we can explore the importance of the differences in institutional settings for debt incidence, debt outstanding and credit constraints. We also explore the implications for debt holding from consumption models, including a numerically solved precautionary savings model. We find that inter-country differences are substantial and remain even after controlling for a host of observable characteristics. This points to institutional differences between the countries being important.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 07-087/3.

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Date of creation: 13 Nov 2007
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Handle: RePEc:dgr:uvatin:20070087

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Related research
Keywords: debt and credit; borrowing constraints; permanent income; panel data; international comparison.;

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
D14 - Microeconomics - - Household Behavior - - - Personal Finance
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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