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Over-indebtedness and its persistence in rural households in Thailand and Vietnam

Bezawit Chichaibelu and Hermann Waibel

Journal of Asian Economics, 2018, vol. 56, issue C, 1-23

Abstract: This study analyzes the determinants of household over-indebtedness and its persistence for rural household borrowers in Thailand and Vietnam. A household is considered to be over-indebted if it is in default or arrears on a loan or if its ratio of debt service to income exceeds 50 percent. The persistence of over-indebtedness was tested using a Heckman random effects dynamic probit model controlling for the effect of household demographic, socioeconomic, and behavioral characteristics. For Thailand, but not for Vietnam, past experience of over-indebtedness increases the probability of being over-indebted in the present, controlling for other household characteristics. Village support systems in Vietnam may be more effective in delivering households out of over-indebtedness than in Thailand where heavy debt burdens are taken more for granted. Household characteristics that significantly increase the probability of over-indebtedness include poverty, household size, low education, overly optimistic forecasting of income, and a sense of being less well off than other villagers.

Keywords: Microcredit; Household over-indebtedness; Persistence of over-indebtedness; Random effects dynamic probit model; Thailand; Vietnam (search for similar items in EconPapers)
Date: 2018
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