Consumer credit and personal networks: exploring the role of network heterogeneity in consumption and borrowing behaviour in Chile

The goal of this article is to assess how network heterogeneity relates to the use of consumer credit. We propose a theoretical framework that underscores three interrelated mechanisms based on social comparison and comparison groups, through which the socio-economic heterogeneity of interpersonal networks could amplify consumption and indebtedness patterns: emulation, competition, and belonging assertion. Socio-economic network heterogeneity is gauged using the ‘position generator’ – a well-established survey instrument in social capital literature, prompting respondents to indicate whether they have social contacts across various occupations or classes. The results derived from our regression analyses indicate that a higher level of socio-economic heterogeneity within one's network is positively associated with the likelihood of possessing consumer credit, whether sourced from department stores or banks. Additionally, we found that network heterogeneity influences the acquisition of consumer credit to a similar degree for individuals from different socio-economic backgrounds in terms of education, social class, and income.