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Household Debt and Social Interactions

Author

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  • Haliassos, Michael
  • Georgarakos, Dimitris
  • Pasini, Giacomo

Abstract

Debt-induced crises, including the subprime crisis, are usually attributed exclusively to supply-side factors. We examine the role of social influences on debt culture, emanating from perceived average income of peers. Utilizing unique information from a household survey, representative of the Dutch population, that circumvents the issue of defining the social circle, we consider collateralized, consumer, and informal loans. We find robust social effects on borrowing - especially among those who consider themselves poorer than their peers - and on indebtedness, suggesting a link to financial distress. We employ a number of approaches to rule out spurious associations and to handle correlated effects.

Suggested Citation

  • Haliassos, Michael & Georgarakos, Dimitris & Pasini, Giacomo, 2012. "Household Debt and Social Interactions," CEPR Discussion Papers 9238, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9238
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    More about this item

    Keywords

    Consumer credit; Household debt; Household finance; Informal loans; Mortgages; Social interactions;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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