A TALE OF TWO SURVEYS: HOUSEHOLD DEBT AND FINANCIAL CONSTRAINTS IN AUSTRALIA

D La Cava · Julian Lincoln Simon

26 citations0/0 files storedRePEc: Research Papers in Economics

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Financial Literacy, Pension, Retirement Analysis Banking stability, regulation, efficiency Housing Market and Economics

Abstract

Over the past decade, household debt (as a share of household income) has reached historically high levels. This has raised concerns about whether, as a result of the rise in debt, households are now more financially ‘fragile’. Using data from the 1998/99 Household Expenditure Survey (HES), a logit model is constructed to examine the relationship between the probability of being financially constrained and the economic and demographic characteristics of households in Australia. We find that the probability of a household being constrained is significantly affected by demographic and economic variables such as age, marital status, home ownership, weekly household income, the proportion of income earned from interest, and the share of income going to repayments on mortgage debt. Unfortunately, however, we cannot separately identify households with investor housing debt and so cannot examine the relationship between this component of household debt and the probability of being financially constrained. We also apply the model to data from the 1993/94 HES and the 2001 Household, Income and Labour Dynamics in Australia (HILDA) Survey. Our results imply that the overall proportion of households who are financially constrained in the economy has fallen or, at worst, remained unchanged between 1994 and 2001. Separating households into financially constrained and unconstrained groups, we find that much of the rise in debt appears to have been due to unconstrained households taking on more debt. As such, the rise in the aggregate debt to income ratio associated with owner-occupier mortgages appears to be the result of voluntary household choice rather than a result of increased household financial distress. Hence, the increase in owner-occupier mortgage debt has not been associated with an increase in the proportion of households who are financially constrained.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 26 citations exist upstream.

References

1978Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence 1989Consumption and Liquidity Constraints: An Empirical Investigation 1989Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence 1990Who is Credit Constrained in the U. S. Economy?1980The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households 1989Consumption and Capital Market Imperfections: An International Comparison 1985The Effect of Liquidity Constraints on Consumption: A Cross-Sectional Analysis 1993Borrowing Constraints, Household Debt, and Racial Discrimination in Loan Markets

Cited by

2007US and European Household Debt and Credit Constraints 2006Household Debt and Marital Instability: Evidence from the Korean Labor and Income Panel Study

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.