Household income requirements and financial conditions

Guay Lim and Sarantis Tsiaplias

Empirical Economics, 2019, vol. 57, issue 5, No 9, 1705-1730

Abstract: Abstract Understanding the income requirements of households is important for examining why households become financially stressed and liquidity constrained. Our econometric approach relies on actual incidences of household-specific financial stress to determine household income requirements. Using an extensive longitudinal dataset of Australian households, we find significant lifecycle effects in income requirements and identify the household types which benefit or are disadvantaged by the typical 30% debt to income measure of financial stress. We also find that, in general, households are locked into tight spending patterns such that, with the exception of households in the top income quintile, financial stress occurs when negative income shocks exceed 30%.

Keywords: Heterogeneity; Income; Consumption; Households; Financial stress; Debt to income (search for similar items in EconPapers)
JEL-codes: D10 E60 H55 J10 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s00181-018-1512-x

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