IDEAS home Printed from https://ideas.repec.org/p/diw/diwsop/diw_sp239.html
   My bibliography  Save this paper

Triggers and Determinants of Severe Household Indebtedness in Germany

Author

Listed:
  • Matthias Keese

Abstract

Overindebted private households have created economic and political concern. Using measures of relative (over-) indebtedness which relate household income and debt services to different concepts of subsistence levels, this paper investigates whether severe household indebtedness is driven by trigger events such as unemployment, childbirth, divorce, or the death of the partner. Exploiting the panel structure of the German Socio-Economic Panel (SOEP), the results suggest that children are likely to cause severe household indebtedness. Unemployment also worsens the relative debt situation mainly due to the associated income drop. Strokes of fate have no direct effect but if they come along with changes in household composition, the associated income shock increases the financial fragility of the household. Furthermore, a main determinant of relative overindebtedness is a home loan which raises doubts about whether families are indeed able to manage their housing finance.

Suggested Citation

  • Matthias Keese, 2009. "Triggers and Determinants of Severe Household Indebtedness in Germany," SOEPpapers on Multidisciplinary Panel Data Research 239, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp239
    as

    Download full text from publisher

    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.344130.de/diw_sp0239.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gianni Betti & Neil Dourmashkin & Mariacristina Rossi & Ya Ping Yin, 2007. "Consumer over‐indebtedness in the EU: measurement and characteristics," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 34(2), pages 136-156, May.
    2. Giuseppe Bertola & Richard Disney & Charles Grant (ed.), 2006. "The Economics of Consumer Credit," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262026015, April.
    3. Ana del Río & Garry Young, 2005. "The impact of unsecured debt on financial distress among British households," Working Papers 0512, Banco de España.
    4. Lusardi, Annamaria & Tufano, Peter, 2015. "Debt literacy, financial experiences, and overindebtedness," Journal of Pension Economics and Finance, Cambridge University Press, vol. 14(4), pages 332-368, October.
    5. Sarah Bridges & Richard Disney, 2004. "Use of credit and arrears on debt among low-income families in the United Kingdom," Fiscal Studies, Institute for Fiscal Studies, vol. 25(1), pages 1-25, March.
    6. Sarah Brown & Karl Taylor, 2008. "Household debt and financial assets: evidence from Germany, Great Britain and the USA," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 171(3), pages 615-643, June.
    7. John Y. Campbell, 2006. "Household Finance," Journal of Finance, American Finance Association, vol. 61(4), pages 1553-1604, August.
    8. Ana del Río & Garry Young, 2005. "The determinants of unsecured borrowing: evidence from the British household panel survey," Working Papers 0511, Banco de España.
    9. DeVaney, Sharon A. & Lytton, Ruth H., 1995. "Household insolvency: A review of household debt repayment, delinquency, and bankruptcy," Financial Services Review, Elsevier, vol. 4(2), pages 137-156.
    10. David Laibson & Andrea Repetto & Jeremy Tobacman, 2000. "A Debt Puzzle," Documentos de Trabajo 80, Centro de Economía Aplicada, Universidad de Chile.
    11. Christa Fricke & Detlev Österreich & Eva Schulze & Gert G. Wagner, 2007. "Überschuldung ist ein Problem fehlender Netzwerke," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 74(7), pages 95-100.
    12. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
    13. Silvia Magri, 2002. "Italian households' debt: determinants of demand and supply," Temi di discussione (Economic working papers) 454, Bank of Italy, Economic Research and International Relations Area.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Keese, Matthias, 2009. "Triggers and Determinants of Severe Household Indebtedness in Germany," Ruhr Economic Papers 150, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. repec:zbw:rwirep:0150 is not listed on IDEAS
    3. Matthias Keese, 2009. "Triggers and Determinants of Severe Household Indebtedness in Germany," Ruhr Economic Papers 0150, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    4. Philip Du Caju & François Rycx & Ilan Tojerow, 2015. "Unemployment Risk and Over-indebtedness A Micro-econometric Perspective," Working Papers CEB 15-046, ULB -- Universite Libre de Bruxelles.
    5. Keese, Matthias, 2010. "Who Feels Constrained by High Debt Burdens? – Subjective vs. Objective Measures of Household Indebtedness," Ruhr Economic Papers 169, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    6. repec:zbw:rwirep:0169 is not listed on IDEAS
    7. Matthias Keese, 2010. "Who Feels Constrained by High Debt Burdens? – Subjective vs. Objective Measures of Household Indebtedness," Ruhr Economic Papers 0169, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    8. Du Caju, Philip & Rycx, François & Tojerow, Ilan, 2016. "Unemployment risk and over-indebtedness," Working Paper Series 1908, European Central Bank.
    9. Keese, Matthias, 2012. "Who feels constrained by high debt burdens? Subjective vs. objective measures of household debt," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 125-141.
    10. C. Giannetti & M. Madia & L. Moretti, 2013. "Job Insecurity and Financial Distress," Working Papers wp887, Dipartimento Scienze Economiche, Universita' di Bologna.
    11. Giovanni D'Alessio & Stefano Iezzi, 2016. "Over-indebtedness in Italy: how widespread and persistent is it?," Questioni di Economia e Finanza (Occasional Papers) 319, Bank of Italy, Economic Research and International Relations Area.
    12. E. Pastrapa & C. Apostolopoulos, 2015. "Estimating Determinants of Borrowing: Evidence from Greece," Journal of Family and Economic Issues, Springer, vol. 36(2), pages 210-223, June.
    13. Giovanni D’Alessio & Stefano Iezzi, 2013. "Household over-indebtedness - Definition and measurement with Italian data," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Proceedings of the Sixth IFC Conference on "Statistical issues and activities in a changing environment", Basel, 28-29 August 2012., volume 36, pages 496-517, Bank for International Settlements.
    14. Cesar Leandro, Julio & Botelho, Delane, 2022. "Consumer over-indebtedness: A review and future research agenda," Journal of Business Research, Elsevier, vol. 145(C), pages 535-551.
    15. Luisa ANDERLONI & Daniela VANDONE, 2008. "Households over-indebtedness in the economic literature," Departmental Working Papers 2008-46, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    16. Gathergood, John, 2012. "Self-control, financial literacy and consumer over-indebtedness," Journal of Economic Psychology, Elsevier, vol. 33(3), pages 590-602.
    17. Barbara CAVALLETTI & Corrado LAGAZIO & Daniela VANDONE & Elena LAGOMARSINO, 2014. "Consumer debt and financial fragility in Italy," Departmental Working Papers 2014-08, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    18. Sarah Kuypers & Gerlinde Verbist, 2022. "Over-indebtedness and poverty : Patterns across household types and policy effects," Working Paper Research 420, National Bank of Belgium.
    19. Jessica Schicks, 2013. "The Sacrifices of Micro-Borrowers in Ghana -- A Customer-Protection Perspective on Measuring Over-Indebtedness," Journal of Development Studies, Taylor & Francis Journals, vol. 49(9), pages 1238-1255, September.
    20. Isabelle Guérin & Christophe Nordman & Elena Reboul, 2019. "The gender of debt and the financialisation of development. Insights from rural southern India," Working Papers CEB 19-016, ULB -- Universite Libre de Bruxelles.
    21. Dilla, Diana, 2017. "Staatsverschuldung und Verschuldungsmentalität [Public Debt and Debt Mentality]," MPRA Paper 79432, University Library of Munich, Germany.
    22. Schicks, Jessica, 2014. "Over-Indebtedness in Microfinance – An Empirical Analysis of Related Factors on the Borrower Level," World Development, Elsevier, vol. 54(C), pages 301-324.

    More about this item

    Keywords

    household finance; debt; overindebtedness; SOEP;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. SOEP based publications

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:diw:diwsop:diw_sp239. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bibliothek (email available below). General contact details of provider: https://edirc.repec.org/data/sodiwde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.