The Relationship Between Sociability and Household Debt

Yıl 2014, Cilt: 4 Sayı: 2, 27 - 58, 01.12.2014

Merve Altundere

https://doi.org/10.31679/adamakademi.167248

Cited By: 3

Öz

This paper examines the influence of social interaction on household debt with using the data from the Survey of Health, Ageing and Retirement in Europe. I investigate whether sociability (participation in social activities like charity work, sport club and educational course) is related with the tendency of holding debt and the amount of debt held. For my total sample consisting of thirteen European countries, I find that sociability has sizeable positive effects on both mortgage debt and non-mortgage debt. It shows that sociable households are more likely to borrow and have greater amounts conditional on borrowing compared to the others. Nevertheless, my country-level findings present a considerable variation across countries in their social effects on debt.

 

Keywords: Household Finance, Social Interaction, Household Debt, European Debt Crisis

Anahtar Kelimeler

-

Kaynakça

• Allenby, Greg M. and Sha Yang (2003), “Modeling Interdependent Consumer Preferences”, Journal of Marketing Research 40(3):282-294.
• Becker, Gary S. and Luis Rayo (2006), “Peer Comparisons and Consumer Debt”, University of Chicago Law Review 73(1):231-248.
• Bertola, Giuseppe and Stefan Hochguertel (2007), “Household Debt and Credit: Economic Issues and Data Problems”, Economic Notes 36(2):115-146.
• Beshears, John, James J. Choi, David Laibson, Brigitte C. Madrian and Katherine L. Milkman (2013), “The Effect of Providing Peer Information on Retirement Savings Decisions”, Journal of Finance forthcoming.
• Binder, Michael and M. Hashem Pesaran (2001), “Life-Cycle Consumption under Social Interactions”, Journal of Economic Dynamics & Control 25:35-83.
• Börsch-Supan, Axel, Agar Brugiavini, Hendrik Jürges, Arie. Kapteyn, Johan Mackenbach, Johannes Siegrist and Guglielmo Weber (Eds.), (2008), First results from the Survey of Health, Ageing and Retirement in Europe (2004-2007). Starting the Longitudinal Dimension, Mannheim: Mannheim Research Institute for the Economics of Aging.
• Borsch-Supan, Axel, Martina Brandt, Christian Hunkler, Thorsten Kneip, Julie Korbmacher, Frederic Malter, Barbara Schaan, Stephanie Stuck and Sabrina Zuber (2013), “Data Resource Profile: The Survey of Health, Ageing and Retirement in Europe (SHARE)”, International Journal of Epidemiology 42(4):992-1001.
• Brock, William A. and Steven N. Durlauf (2001), “Interactions-Based Models”, In James J.
• Heckman and Edward E. Leamer (Eds.), Handbook of Econometrics, 5:3297-3380, Amsterdam: North-Holland.
• Brown, Jeffrey R., Zoran Ivkovich, Paul A. Smith and Scott Weisbenner (2008), “Neighbors Matter: Causal Community Effects and Stock Market Participation”, Journal of Finance 63:1509- 1531.
• Brown, Sarah, Pulak Ghosh and Karl Taylor (2014), “Household Finances and Social Interaction: Bayesian Analysis of Household Panel Data”, Review of Income and Wealth forthcoming.
• Burbidge, John B., Lonnie Magee and A. Leslie Robb (1988), “Alternative Transformations to Handle Extreme Values of the Dependent Variable”, Journal of the American Statistical Association 83:123-127.
• Cox, Donald and Tullio Jappelli (1993), “The Effect of Borrowing Constraints on Consumer Liabilities”, Journal of Money, Credit, and Banking 25(2):197–213.
• Crook, Jonathan (2001), “The Demand for Household Debt in the USA: Evidence from the 1995 Survey of Consumer Finance”, Applied Financial Economics 11(1):83-91.
• Del Rio, Ana and Garry Young (2006), “The Determinants of Unsecured Borrowing: Evidence from the BHPS”, Applied Financial Economics 16(15):1119-1144.
• Duflo, Esther and Emmanuel Saez (2002), “Participation and Investment Decisions in a Retirement Plan: The Influence of Colleagues’ Choices”, Journal of Public Economics 85(1):121-148.
• Durlauf, Steven N. and Yannis M. Ioannides (2010), “Social Interactions”, Annual Review of Economics 2(1):451-478.
• Eurostat, “General Government Gross Debt”, http://epp.eurostat.ec.europa.eu/tgm/table. do?tab=table&init=1& plugin=1&language=en&pcode=tsdde410 (24.4.2014).
• Georgarakos, Dimitris and Giacomo Pasini (2011), “Trust, Sociability, and Stock Market Participation”, Review of Finance 15(4):693-725.
• Georgarakos, Dimitris, Michael Haliassos and Giacomo Pasini (2014), “Household Debt and Social Interactions”, Review of Financial Studies 27(5):1404-1433.
• Giannetti, Mariassunta and Andrei Simanov (2009), “Social Interactions and Entrepreneurial Activity”, Journal of Economics & Management Strategy 18(3):665-709.
• Grodner, Andrew, Thomas J. Kniesner and John A. Bishop (2011), “Social Interactions in the Labor Market”, Foundations and Trends® in Microeconomics 6(4):265-366.
• Hong, Harrison, Jeffrey D. Kubik and Jeremy C. Stein (2004), “Social Interaction and Stock- Market Participation”, The Journal of Finance 59(1):137-163.
• Lea, Stephen E. G., Paul Webley and R. Mark Levine (1993), “The Economic Psychology of Consumer Debt”, Journal of Economic Psychology 14(1):85-119.
• Lilico, Andrew (2010), Household Indebtedness in the EU, Brussels: European Parliament.
• Livingstone, Sonia M. and Peter K. Lunt (1992), “Predicting Personal Debt and Debt Repayment: Psychological, Social and Economic Determinants”, Journal of Economic Psychology 13(1):111–134.
• Magri, Silvia (2002), “Italian Households’ Debt: Determinants of Demand and Supply”, Banca d’Italia, Temi di Discussione No. 454.
• Miller, Michelle M. (2014), “Social Networks and Personal Bankruptcy”, Journal of Empirical Legal Studies forthcoming.
• Mitrakos, Theodoros M. and George T. Simigiannis (2009), “The Determinants of Greek Household Indebtedness and Financial Stress”, Bank of Greece, Economic Bulletin 32:7-26.
• Pence, Karen M (2006), “The Role of Wealth Transformations: An Application to Estimating the Effect of Tax Incentives on Saving”, Contributions to Economic Analysis & Policy 5(1): Article 20.
• Veblen, Thorstein (1899), The Theory of the Leisure Class, Oxford: Oxford University Press.
• Yılmazer, Tansel and Sharon A. DeVaney (2005), “Household Debt over the Life Cycle”, Financial Services Review 14:285-304.
• Zenou, Yves (2013), “Social Interactions and the Labor Market”, Revue d’Economie Politique 123(3):307-331.