Mortgage Indebtedness and Household Financial Distress
Using comparable survey data from twelve European countries we investigate households' attitudes towards mortgage indebtedness. We find that a given debt burden creates much higher distress in Southern countries, France and Belgium, where fewer households have a mortgage outstanding relative to countries where a sizeable part of the population uses mortgage debt, like the UK, the Netherlands, and Denmark. This is the case after taking into account ppp-adjusted income levels, a rich set of socioeconomic characteristics, housing traits, country-specific constant terms, and household unobserved heterogeneity. We attribute part of this asymmetry to cross-country differences in the expansion of credit markets, which facilitate differential access to liquidity. Household's reported distress is also affected by excess indebtedness relative to the debt load of reference households, and crucially so in countries with less expanded mortgage markets. Thus it appears that households evaluate their own debt burden partly in comparison with the debt position of their peer group and in a way consistent with social stigma considerations which lessen in significance as markets expand. Households' assessment of a debt burden therefore tends to diminish in more expanded credit markets and this process can be reinforced by reference to other households in a growing pool of debt holders.
|Date of creation:||Dec 2009|
|Contact details of provider:|| Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany|
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Djankov, Simeon & McLiesh, Caralee & Shleifer, Andrei, 2007.
"Private credit in 129 countries,"
Journal of Financial Economics,
Elsevier, vol. 84(2), pages 299-329, May.
- Shleifer, Andrei & Djankov, Simeon & McLiesh, Caralee, 2007. "Private credit in 129 countries?," Scholarly Articles 27867134, Harvard University Department of Economics.
- Simeon Djankov & Caralee McLiesh & Andrei Shleifer, 2005. "Private Credit in 129 Countries," NBER Working Papers 11078, National Bureau of Economic Research, Inc.
- Clark, Andrew E. & Oswald, Andrew J., 1994.
"Satisfaction and comparison income,"
CEPREMAP Working Papers (Couverture Orange)
- Childers, Terry L & Rao, Akshay R, 1992. " The Influence of Familial and Peer-Based Reference Groups on Consumer Decisions," Journal of Consumer Research, Oxford University Press, vol. 19(2), pages 198-211, September.
- Brigitte C. Madrian & Dennis F. Shea, 2000.
"The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior,"
NBER Working Papers
7682, National Bureau of Economic Research, Inc.
- Brigitte C. Madrian & Dennis F. Shea, 2001. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1149-1187.
- Frey, Bruno S & Stutzer, Alois, 2000.
"Happiness, Economy and Institutions,"
Royal Economic Society, vol. 110(466), pages 918-938, October.
- Bruno S. Frey & Alois Stutzer, "undated". "Happiness, Economy and Institutions," IEW - Working Papers 015, Institute for Empirical Research in Economics - University of Zurich.
- Bruno S. Frey & Alois Stutzer, 2000. "Happiness, Economy and Institutions," CESifo Working Paper Series 246, CESifo Group Munich.
- 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.
- McBride, Michael, 2001. "Relative-income effects on subjective well-being in the cross-section," Journal of Economic Behavior & Organization, Elsevier, vol. 45(3), pages 251-278, July.
- Harrison Hong & Jeffrey D. Kubik & Jeremy C. Stein, 2001.
"Social Interaction and Stock-Market Participation,"
NBER Working Papers
8358, National Bureau of Economic Research, Inc.
- Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-659, May.
- Esther Duflo & Emmanuel Saez, 2000.
"Participation and Investment Decisions in a Retirement Plan: The Influence of Colleagues' Choices,"
NBER Working Papers
7735, National Bureau of Economic Research, Inc.
- Duflo, Esther & Saez, Emmanuel, 2002. "Participation and investment decisions in a retirement plan: the influence of colleagues' choices," Journal of Public Economics, Elsevier, vol. 85(1), pages 121-148, July.
- David B. Gross, 2002.
"An Empirical Analysis of Personal Bankruptcy and Delinquency,"
Review of Financial Studies,
Society for Financial Studies, vol. 15(1), pages 319-347, March.
- David B. Gross & Nicholas S. Souleles, 1999. "An Empirical Analysis of Personal Bankruptcy and Delinquency," Center for Financial Institutions Working Papers 98-28, Wharton School Center for Financial Institutions, University of Pennsylvania.
- David B. Gross & Nicholas S. Souleles, 2001. "An Empirical Analysis of Personal Bankruptcy and Delinquency," NBER Working Papers 8409, National Bureau of Economic Research, Inc.
- Jappelli Tullio & Pagano Marco & Di Maggio Marco, 2013.
"Households' indebtedness and financial fragility,"
Journal of Financial Management, Markets and Institutions,
Società editrice il Mulino, issue 1, pages 23-46, January.
- Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
- Dimitrios Christelis & Dimitris Georgarakos & Michael Haliassos, 2008.
"Economic Integration and Mature Portfolios,"
CSEF Working Papers
194, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 23 Jan 2013.
- Burcu Duygan-Bump & Charles Grant, 2009. "Household debt repayment behaviour: what role do institutions play?," Economic Policy, CEPR;CES;MSH, vol. 24, pages 107-140, 01.
- DeVaney, Sharon A. & Lytton, Ruth H., 1995. "Household insolvency: A review of household debt repayment, delinquency, and bankruptcy," Financial Services Review, Elsevier, vol. 4(2), pages 137-156.
- Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
- Orla May & Merxe Tudela, 2005. "When is mortgage indebtedness a financial burden to British households? A dynamic probit approach," Bank of England working papers 277, Bank of England.
- Ana del Río & Garry Young, 2005.
"The impact of unsecured debt on financial distress among British households,"
0512, Banco de España;Working Papers Homepage.
- Ana Del-Río & Garry Young, 2005. "The impact of unsecured debt on financial distress among British households," Bank of England working papers 262, Bank of England.
- Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
- Diaz-Serrano, Luis, 2005. "Income volatility and residential mortgage delinquency across the EU," Journal of Housing Economics, Elsevier, vol. 14(3), pages 153-177, September.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp4631. 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: (Mark Fallak)
If references are entirely missing, you can add them using this form.