Do Children Matter to the Household Debt Burden?

Abstract

Abstract In this paper, we assess the scale of indebtedness of households with children and investigate the impact of having children on the likelihood of falling into excessive debt. Using the unique dataset on indebted households in Poland, we employ two indicators to identify over-indebtedness: debt service-to-income ratio (DSTI) and subjective debt burden (SB). Applying two different debt measures allows encompassing both the economic and psychological dimensions of debt burden. In addition, we divide households into two groups: young (with a reference person aged under 35) and middle-aged and older adults (aged 35+). We find that the number of children increases the monthly debt repayments and reduces the likelihood of over-indebtedness, both according to DSTI and SB, for middle-aged and older adult households. There is no evidence for the influence of children on the over-indebtedness of young families. Our results suggest that for this age group of households, the other variables related to their economic situation and debt structures may explain the likelihood of over-indebtedness better than the presence of children.

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