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Can educational investment mitigate the impact of aging on household leverage ratio?

Author

Listed:
  • Long, Teng
  • Bu, Kun
  • Du, Pengfei
  • Wang, Zhige

Abstract

Population aging is a critical determinant that significantly influences the household leverage ratio. Can the adverse effects of aging be mitigated through enhancements in residents' educational attainment? Drawing on panel data from 52 economies experiencing population aging between 1990 and 2019, this study examines the mechanism by which educational investment influences household leverage ratio. The findings indicate that: Firstly, education investment can partially alleviate the negative impact of population aging on household leverage. Secondly, enhancing residents' educational investment can reduce household debt by increasing savings rates, thereby indirectly lowering the household leverage ratio. Thirdly, while an increase in educational investment may raise labor force participation rates, it also leads to higher pension demands and subsequently increases household leverage. Fourthly, the moderating effect of compulsory basic education is more pronounced in economies that have overcome “Old Before Rich” characteristics; however, for economies still grappling with such characteristics, higher quality education exhibits a significantly superior moderating effect compared to compulsory basic education. Therefore, measures such as improving higher education systems' infrastructure, actively promoting pension contribution system reforms and maintaining sufficient fiscal space will aid in reducing household leverage ratios and mitigating risks associated with household debt.

Suggested Citation

  • Long, Teng & Bu, Kun & Du, Pengfei & Wang, Zhige, 2024. "Can educational investment mitigate the impact of aging on household leverage ratio?," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 1335-1347.
    • Handle: RePEc:eee:reveco:v:89:y:2024:i:pa:p:1335-1347
    DOI: 10.1016/j.iref.2023.09.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Aging; Education investment; Household leverage ratio; Debt ratio;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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