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Household debt and social interactions

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  • Georgarakos, Dimitris
  • Haliassos, Michael
  • Pasini, Giacomo

Abstract

Debt-induced crises, including the subprime, 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 Info

Paper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2012/05.

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Date of creation: 2012
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Handle: RePEc:zbw:cfswop:201205

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Keywords: Household Finance; Household Debt; Social Interactions; Mortgages; Consumer Credit; Informal Loans;

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The social pressure of overborrowing
    by Economic Logician in Economic Logic on 2013-07-01 13:51:00
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Cited by:
  1. Fares Al-Hussami & Álvaro Martín Remesal, 2012. "Current Account Imbalances and Income Inequality: Theory and Evidence," Kiel Advanced Studies Working Papers 459, Kiel Institute for the World Economy.
  2. Brown, Sarah & Ghosh, Pulak & Taylor, Karl, 2014. "Household Finances and Social Interaction: Bayesian Analysis of Household Panel Data," IZA Discussion Papers 8301, Institute for the Study of Labor (IZA).
  3. Lahno, Amrei M. & Serra-Garcia, Marta, 2012. "Peer Effects in Risk Taking," Discussion Papers in Economics 14309, University of Munich, Department of Economics.
  4. Haliassos, Michalis & Jansson, Thomas & Karabulut, Yigitcan, 2014. "Incompatible European partners? Cultural predispositions and household financial behavior," SAFE Working Paper Series 58, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.

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