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Keeping Up With the Novaks? Income Distribution as a Determinant of Household Debt in CESEE

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  • Mariya Hake
  • Philipp Poyntner

Abstract

This paper constitutes an initial attempt to shed light on the role of income distribution for household debt in Central, Eastern, and Southeastern Europe (CESEE). Using household‐level data from the OeNB’s Euro Survey for the period 2008–2018, we address the question whether interpersonal comparisons (“Keeping up with the Novaks”) are associated with the probability of having a loan and planning to take out a loan. Applying multilevel probit modeling to consider the hierarchical structure of the data, our results support the notion that higher income inequality is negatively correlated with the probability of having a loan at the bottom of the distribution, and positively at the top. We show this impact for almost all components of household debt, but evidence is strongest for mortgage and foreign currency loans. Loan plans are associated with income inequality at the very top of the income distribution.

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  • Mariya Hake & Philipp Poyntner, 2022. "Keeping Up With the Novaks? Income Distribution as a Determinant of Household Debt in CESEE," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(S1), pages 224-260, April.
    • Handle: RePEc:bla:revinw:v:68:y:2022:i:s1:p:s224-s260
    DOI: 10.1111/roiw.12540
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    1. Matthias Enzinger & Melanie Koch & Aleksandra Riedl, 2022. "Financial vulnerabilities and debt at risk of CESEE borrowers: a cross-country analysis," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 44, pages 25-44.

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    JEL classification:

    • G0 - Financial Economics - - General
    • D1 - Microeconomics - - Household Behavior
    • D3 - Microeconomics - - Distribution

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