Household debt and social interactions

Dimitris Georgarakos, Michael Haliassos and Giacomo Pasini

No 1, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: Can concern with relative standing, which has been shown to influence consumption and labor supply, also increase borrowing and the likelihood of financial distress? We find that perceived peer income contributes to debt and the likelihood of financial distress among those who consider themselves poorer than their peers. We use unique responses describing perceived peer characteristics from a Dutch population-wide survey to handle major challenges of uncovering social interaction effects on borrowing: (i) debts, unlike conspicuous consumption, are often hidden from peers, and (ii) location is missing in anonymized data. We employ several approaches to uncover exogenous, rather than correlated, effects.

Keywords: Household finance; household debt; social interactions; mortgages; consumercredit; informal loans (search for similar items in EconPapers)
JEL-codes: E21 G11 (search for similar items in EconPapers)
Date: 2013, Revised 2013
New Economics Papers: this item is included in nep-iue, nep-soc and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Related works:
Journal Article: Household Debt and Social Interactions (2014)
Working Paper: Household Debt and Social Interactions (2012)
Working Paper: Household debt and social interactions (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:1

DOI: 10.2139/ssrn.2208516

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