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Household Debt and Financial Assets: Evidence from Great Britain, Germany and the United States


  • Sarah Brown


  • Karl Taylor



We explore the determinants of debt and financial asset accumulation at the household level using survey data for Great Britain, Germany and the United States (US). Given that debt and assets are both components of a household’s financial portfolio, we explore the degree of inter-dependence between households’ assets and liabilities by jointly modelling these two aspects of the portfolio. Indeed, our empirical findings for both countries support a high degree of inter-dependence between debt and asset holding. Furthermore, the nature of this inter-dependence varies across income ranges and age groups with the weakest correlation between financial assets and debt being found for the lowest income groups in Great Britain, suggesting that such groups may be particularly vulnerable to adverse financial shocks. Evidence supporting inter-dependence between assets and debt no longer remains, however, once we focus on debtors which suggests that households in debt may potentially face difficulties following adverse changes in their financial situation.

Suggested Citation

  • Sarah Brown & Karl Taylor, 2005. "Household Debt and Financial Assets: Evidence from Great Britain, Germany and the United States," Discussion Papers in Economics 05/5, Department of Economics, University of Leicester.
  • Handle: RePEc:lec:leecon:05/5

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    References listed on IDEAS

    1. Lee, Byung-Joo, 1992. "A nested Tobit analysis for a sequentially censored regression model," Economics Letters, Elsevier, vol. 38(3), pages 269-273, March.
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    Cited by:

    1. Herrala, Risto & Kauko, Karlo, 2007. "Household loan loss risk in Finland : estimations and simulations with micro data," Research Discussion Papers 5/2007, Bank of Finland.
    2. González Mario Alejandro & John Jairo León, 2007. "Análisis del endeudamiento de los hogares colombianos," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE, October.
    3. Sarah Brown & Gaia Garino & Karl Taylor, 2008. "Household Finances and Attitudes towards Risk," Working Papers 2008005, The University of Sheffield, Department of Economics, revised Dec 2009.

    More about this item


    Debt; Financial Assets; Household Financial Portfolio; Random Effects; Tobit Estimator;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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