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Triggers and Determinants of Severe Household Indebtedness in Germany

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  • Matthias Keese

Abstract

Overindebted private households have created economic and political concern. Using measures of relative (over-) indebtedness which relate household income and debt services to different concepts of subsistence levels, this paper investigates whether severe household indebtedness is driven by trigger events such as unemployment, childbirth, divorce, or the death of the partner. Exploiting the panel structure of the German Socio-Economic Panel (SOEP), the results suggest that children are likely to cause severe household indebtedness. Unemployment also worsens the relative debt situation mainly due to the associated income drop. Strokes of fate have no direct effect but if they come along with changes in household composition, the associated income shock increases the financial fragility of the household. Furthermore, a main determinant of relative overindebtedness is a home loan which raises doubts about whether families are indeed able to manage their housing finance.

Suggested Citation

  • Matthias Keese, 2009. "Triggers and Determinants of Severe Household Indebtedness in Germany," SOEPpapers on Multidisciplinary Panel Data Research 239, DIW Berlin, The German Socio-Economic Panel (SOEP).
  • Handle: RePEc:diw:diwsop:diw_sp239
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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.344130.de/diw_sp0239.pdf
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    References listed on IDEAS

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    Cited by:

    1. Keese, Matthias, 2010. "Who Feels Constrained by High Debt Burdens? – Subjective vs. Objective Measures of Household Indebtedness," Ruhr Economic Papers 169, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. Matthias Keese & Hendrik Schmitz, 2014. "Broke, Ill, and Obese: Is There an Effect of Household Debt on Health?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(3), pages 525-541, September.
    3. Marianna Brunetti & Elena Giarda & Costanza Torricelli, 2016. "Is Financial Fragility a Matter of Illiquidity? An Appraisal for Italian Households," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(4), pages 628-649, December.
    4. repec:zbw:rwirep:0258 is not listed on IDEAS
    5. Matthias Keese, 2011. "Thrifty Wives and Lavish Husbands? – Bargaining Power and Financial Dicisions in Germany," Ruhr Economic Papers 0258, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    6. Grzegorz Wałęga & Agnieszka Wałęga, 2021. "Over-indebted Households in Poland: Classification Tree Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 153(2), pages 561-584, January.
    7. Laily Dwi Arsyianti & Salina Kassim & Adewale Abideen Adeyemi, 2018. "Debt Taking And Charity-Giving Among Low-Income Households: Strengthening Resilience In Islamic Perspective," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 4(1), pages 1-22, August.
    8. Keese, Matthias, 2011. "Thrifty Wives and Lavish Husbands? – Bargaining Power and Financial Dicisions in Germany," Ruhr Economic Papers 258, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    9. Heindl, Peter & Liessem, Verena, 2017. "Ursachen von Stromsperren in Privathaushalten: Empirische Ergebnisse aus der Allgemeinen Sozialberatung [Factors correlated with utility arrears and power cut-offs in Germany: Empirical evidence fr," ZEW Discussion Papers 17-061, ZEW - Leibniz Centre for European Economic Research.
    10. Rodrigo Cifuentes & Felipe Martínez, 2020. "Over-indebtedness in Households: Measurement and Determinants," Working Papers Central Bank of Chile 869, Central Bank of Chile.
    11. Remya Tressa Jacob & Rudra Sensarma & Gopakumaran Nair, 2021. "Is Rural Household Debt Sustainable in a Financially Included Region? Evidence from Three Districts of Kerala, India," Working papers 430, Indian Institute of Management Kozhikode.

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    More about this item

    Keywords

    household finance; debt; overindebtedness; SOEP;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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