Household Debt and Social Interactions

Michael Haliassos, Dimitris Georgarakos and Giacomo Pasini

No 9238, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Debt-induced crises, including the subprime crisis, are usually attributed exclusively to supply-side factors. We examine the role of social influences on debt culture, emanating from perceived average income of peers. Utilizing unique information from a household survey, representative of the Dutch population, that circumvents the issue of defining the social circle, we consider collateralized, consumer, and informal loans. We find robust social effects on borrowing - especially among those who consider themselves poorer than their peers - and on indebtedness, suggesting a link to financial distress. We employ a number of approaches to rule out spurious associations and to handle correlated effects.

Keywords: Consumer credit; Household debt; Household finance; Informal loans; Mortgages; Social interactions (search for similar items in EconPapers)
JEL-codes: E21 G11 (search for similar items in EconPapers)
Date: 2012-12
New Economics Papers: this item is included in nep-hme, nep-iue, nep-soc and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Household Debt and Social Interactions (2014)
Working Paper: Household debt and social interactions (2013)
Working Paper: Household debt and social interactions (2012)
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