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Estimation of the adequate living expenses threshold during the Greek crisis

Author

Listed:
  • Eirini Andriopoulou

    (Council of Economic Advisors, Ministry of Finance)

  • Apostolos Fasianos

    (Council of Economic Advisors, Ministry of Finance)

  • Athanassios Petralias

    () (Bank of Greece)

Abstract

The aim of this study is to present the underlying methodology behind the estimation of the Adequate Living Expenses (ALE) Threshold for the Greek population. The ALE threshold was first introduced in 2014 by the Greek authorities as a benchmark, mainly for protecting over-indebted mortgage holders from foreclosure of the primary residence. In this manuscript, we present alternative methodological approaches and specifications considered to estimate this threshold and we report updated estimates for the year 2017. The ALE threshold is defined through expenditure for the purchase of goods and services and interpreted as the income level that the household should possess in order to cover the level of acceptable living expenses, following the median expenditure pattern of Greek households. By taking into consideration the main categories of the Greek Household Budget Survey, we examined different expenditure specifications, based on the necessity of the needs covered by gradually excluding items that could be considered as “luxury” items (four scenarios were developed). Quantile regression and linear robust regression accounting for the presence of outliers was applied and various model specifications were tested. Our results control for household structure, degree of urbanization and mortgage holding, and interactions among them. In 2017, for a family with two children ALE threshold ranged from 1,196€ to 1,497€ per month, reduced by approximately 11.5% compared to 2012, depending on the expenditure specification. The estimated ALE threshold lies considerably above the poverty line in all cases.

Suggested Citation

  • Eirini Andriopoulou & Apostolos Fasianos & Athanassios Petralias, 2019. "Estimation of the adequate living expenses threshold during the Greek crisis," Working Papers 261, Bank of Greece.
  • Handle: RePEc:bog:wpaper:261
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    References listed on IDEAS

    as
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    7. Christophe Muller & Sami Bibi, 2010. "Refining Targeting against Poverty Evidence from Tunisia," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(3), pages 381-410, June.
    8. Brück, Tilman & Danzer, Alexander M. & Muravyev, Alexander & Weisshaar, Natalia, 2010. "Poverty during transition: Household survey evidence from Ukraine," Journal of Comparative Economics, Elsevier, vol. 38(2), pages 123-145, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Mortgage; household budget; insolvency; reference budget; foreclosures;

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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