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Household Debt: the Role of Income and Business Ownership in a Small Emerging Country

Author

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  • José Rivero

    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

  • Graciela Sanroman

    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

Abstract

We analyze the debt side of household balance sheets in a small economy with underdeveloped financial markets. Our main focus is on the influence of income on the intensive margin of debt holdings and how business ownership affects that relationship. Using data from a novel Uruguayan dataset, we estimate selectioncorrected Conditional Quantile Regressions (CQR). The motivation for using CQR stems from the fact that the conditional distribution of debt holdings is highly asymmetric. This makes it worthwhile to take the analysis beyond the mean. In addition, understanding the effects of income and entrepreneurship for the most indebted households is a policy relevant question. We find that income does not affect the probability of being indebted but it has a significant impact on the intensive margin of debt holdings. The income elasticity of debt stocks is positive and varies substantially across types of households, being those who own formal businesses the most sensitive to income variations.

Suggested Citation

  • José Rivero & Graciela Sanroman, 2020. "Household Debt: the Role of Income and Business Ownership in a Small Emerging Country," Documentos de Trabajo (working papers) 0820, Department of Economics - dECON.
    • Handle: RePEc:ude:wpaper:0820
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    File URL: https://hdl.handle.net/20.500.12008/26107
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G0 - Financial Economics - - General

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