Over-indebtedness and poverty: Patterns across household types and policy effects

Sarah Kuypers and Gerlinde Verbist
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Sarah Kuypers: : Herman Deleeck Centre for Social Policy, University of Antwerp
Gerlinde Verbist: Herman Deleeck Centre for Social Policy, University of Antwerp

No 420, Working Paper Research from National Bank of Belgium

Abstract: Household debt has increased significantly since the second half of the 20th century, making it one of the cornerstones of household financial behaviour. It is, however, necessary to monitor that indebtedness does not spiral out of control, as it can have negative consequences both at the micro and macro level. In this paper, we measure over-indebtedness in the poverty framework, while also taking into account the (potential) leverage by assets. We focus on a case study of Belgium, using data from four waves of the Eurosystem Household Finance and Consumption Survey (HFCS). Our results are relevant both in terms of the levels of over-indebtedness measured as well as from the point of household heterogeneity and policy relevance. While the classical indicators mainly identify those who initially borrow large amounts as over-indebted, our analyses point towards the importance of low disposable income and the ownership of non-mortgage debt in explaining over-indebtedness, poverty and financial vulnerability. We also simulate two potential policy reforms which address these two main risk factors.

Keywords: debt; over-indebtedness; poverty; social policy; Belgium (search for similar items in EconPapers)
JEL-codes: G51 I32 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2022-10
New Economics Papers: this item is included in nep-ban and nep-eur
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Persistent link: https://EconPapers.repec.org/RePEc:nbb:reswpp:202210-420

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