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Labor Market and Household Debt in Asia Pacific Countries: Dynamic Heterogeneous Panel Data Analysis

Author

Listed:
  • Suhal Kusairi

    (Financial Economics, School of Social and Economic Development Universiti Malaysia Terengganu, Malaysia)

  • Suriyani Muhamad

    (#x2020;Labour Economics, School of Social and Economic Development Universiti Malaysia Terengganu, Malaysia)

  • M Musdholifah

    (#x2021;Department of Management, Faculty of Economics, State University of Surabaya, Indonesia)

  • Shu-Chen Chang

    (#xA7;Department of Business Administration, National Formosa University, Yunlin, Taiwan)

Abstract

An overwhelming increase in household debt in the last decade has stirred researchers to explore the determinants of this phenomena, especially the role of the labor market. This paper comes to identify these determinants using the macro panel data from Asia Pacific countries for 1994–2016 and dynamic heterogeneous panel data analysis. The empirical results found that household consumption, housing price index, and labor force have a long-run positive relationship with household debt. In contrast, the unemployment rate and dependency ratio have a long-run negative relationship with household debt. This implies that when consumption, housing price, and labor force increase, then the household debt will increase, and when the unemployment rate and dependency ratio increase, the household debt will decrease. Also, in the short-run, public debt does affect private consumption, and it is not different among countries. The labor market, as represented by the unemployment rate, dependency ratio, and labor force, has a strong effect on the household debt in the long-run. Based on these findings, the government should pay more attention to the household debt related to property and commodity markets because they expose the short-run volatility and create problems for the long-term.

Suggested Citation

  • Suhal Kusairi & Suriyani Muhamad & M Musdholifah & Shu-Chen Chang, 2019. "Labor Market and Household Debt in Asia Pacific Countries: Dynamic Heterogeneous Panel Data Analysis," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 10(02), pages 1-15, June.
    • Handle: RePEc:wsi:jicepx:v:10:y:2019:i:02:n:s179399331950011x
    DOI: 10.1142/S179399331950011X
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