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US and European Household Debt and Credit Constraints

Author

Listed:
  • Jonathan Crook

    () (University of Edinburgh)

  • Stefan Hochguertel

    () (VU University Amsterdam)

Abstract

This paper uses micro data from four OECD countries (the United States, Spain, Italy, and the Netherlands), to assess the determinants of household debt holding and to investigate whether or not credit constraints are important for household debt holding. We extend the existing literature in important ways. First, we present comparative evidence for four countries at the micro level, where we rely on household panel data for two countries; we are thus able to control for unobserved heterogeneity via individual household effects and to track changes in household behaviour over time. Second, by making data across countries as comparable as possible, we can explore the importance of the differences in institutional settings for debt incidence, debt outstanding and credit constraints. We also explore the implications for debt holding from consumption models, including a numerically solved precautionary savings model. We find that inter-country differences are substantial and remain even after controlling for a host of observable characteristics. This points to institutional differences between the countries being important.

Suggested Citation

  • Jonathan Crook & Stefan Hochguertel, 2007. "US and European Household Debt and Credit Constraints," Tinbergen Institute Discussion Papers 07-087/3, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20070087
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    File URL: http://papers.tinbergen.nl/07087.pdf
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    References listed on IDEAS

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    Cited by:

    1. Philip Du Caju & François Rycx & Ilan Tojerow, 2015. "Unemployment Risk and Over-indebtedness A Micro-econometric Perspective," Working Papers CEB 15-046, ULB -- Universite Libre de Bruxelles.
    2. Nikolay Hristov & Oliver Hülsewig & Timo Wollmershäuser, 2014. "Financial Frictions and Inflation Differentials in a Monetary Union," Manchester School, University of Manchester, vol. 82(5), pages 549-595, September.
    3. Luisa ANDERLONI & Daniela VANDONE, 2011. "Vulnerabilità e benessere delle famiglie italiane," Departmental Working Papers 2011-40, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.

    More about this item

    Keywords

    debt and credit; borrowing constraints; permanent income; panel data; international comparison.;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • 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
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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