IDEAS home Printed from https://ideas.repec.org/p/bof/bofitp/2020_003.html
   My bibliography  Save this paper

Keeping up with the Novaks? Income distribution as a determinant of household debt in CESEE

Author

Listed:
  • Hake, Mariya
  • Poyntner, Philipp

Abstract

This paper constitutes an initial attempt to shed light on the role of income distribution in household debt and financial market access in Central, Eastern and Southeastern Europe (CESEE). Using household-level data from the OeNB’s Euro Survey for the period 2009-2018, we address the question whether interpersonal comparisons (“keeping up with the CESEE Joneses" i.e. "the Novaks”) affect the probability of having and planning a loan. Applying multilevel probit modeling to take into account 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, car and foreign currency loans. Interpersonal comparisons turn out to drive loan intentions, however, mainly on the very top of the income distribution.

Suggested Citation

  • Hake, Mariya & Poyntner, Philipp, 2020. "Keeping up with the Novaks? Income distribution as a determinant of household debt in CESEE," BOFIT Discussion Papers 3/2020, Bank of Finland, Institute for Economies in Transition.
    • Handle: RePEc:bof:bofitp:2020_003
    as

    Download full text from publisher

    File URL: https://helda.helsinki.fi/bof/bitstream/123456789/16576/1/dp0320.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Rémi Bazillier & Jérôme Hericourt, 2017. "The Circular Relationship Between Inequality, Leverage, And Financial Crises," Journal of Economic Surveys, Wiley Blackwell, vol. 31(2), pages 463-496, April.
    2. Drechsel-Grau, Moritz & Schmid, Kai D., 2014. "Consumption–savings decisions under upward-looking comparisons," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 254-268.
    3. Michael Kumhof & Romain Rancière & Pablo Winant, 2015. "Inequality, Leverage, and Crises," American Economic Review, American Economic Association, vol. 105(3), pages 1217-1245, March.
    4. Matteo Iacoviello, 2008. "Household Debt and Income Inequality, 1963-2003," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(5), pages 929-965, August.
    5. Michael D. Carr & Arjun Jayadev, 2015. "Relative Income and Indebtedness: Evidence from Panel Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(4), pages 759-772, December.
    6. Kerwin Kofi Charles & Erik Hurst & Nikolai Roussanov, 2009. "Conspicuous Consumption and Race," The Quarterly Journal of Economics, Oxford University Press, vol. 124(2), pages 425-467.
    7. Christian Alexander Belabed & Mariya Hake, 2018. "Income inequality and trust in national governments in Central, Eastern and Southeastern Europe," Working Papers 222, Oesterreichische Nationalbank (Austrian Central Bank).
    8. Yuriy Gorodnichenko & Marianna Kudlyak & John Mondragon & Olivier Coibion, 2014. "Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data," 2014 Meeting Papers 402, Society for Economic Dynamics.
    9. Ori Heffetz, 2011. "A Test of Conspicuous Consumption: Visibility and Income Elasticities," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1101-1117, November.
    10. Michael Kumhof & Romain Rancière & Pablo Winant, 2015. "Inequality, Leverage, and Crises," Post-Print halshs-01511070, HAL.
    11. David Loschiavo, 2016. "Household debt and income inequality: evidence from Italian survey data," Temi di discussione (Economic working papers) 1095, Bank of Italy, Economic Research and International Relations Area.
    12. Apostolos Fasianos & Hamid Raza & Stephen Kinsella, 2017. "Exploring the link between household debt and income inequality: an asymmetric approach," Applied Economics Letters, Taylor & Francis Journals, vol. 24(6), pages 404-409, March.
    13. Sophia Rabe-Hesketh & Anders Skrondal, 2012. "Multilevel and Longitudinal Modeling Using Stata, 3rd Edition," Stata Press books, StataCorp LP, edition 3, number mimus2, April.
    14. Yuriy Gorodnichenko & Marianna Kudlyak & John Mondragon & Olivier Coibion, 2014. "Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data," 2014 Meeting Papers 402, Society for Economic Dynamics.
    15. Ireland, Norman J., 1994. "On limiting the market for status signals," Journal of Public Economics, Elsevier, vol. 53(1), pages 91-110, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bof:bofitp:2020_003. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Minna Nyman). General contact details of provider: http://edirc.repec.org/data/bofitfi.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.