US and European Household Debt and Credit Constraints

Tinbergen Institute Discussion Paper No. 2007-087/3

63 Pages Posted: 4 Dec 2007

See all articles by Jonathan N. Crook

Jonathan N. Crook

University of Edinburgh - Business School

Stefan Hochguertel

VU University Amsterdam; Tinbergen Institute

Date Written: November 2007


This paper uses micro data from four OECD countries (the United States, Spain, Italy, and the Netherlands), to assess the determinants of household debt holding and to investigate whether or not credit constraints are important for household debt holding. We extend the existing literature in important ways. First, we present comparative evidence for four countries at the micro level, where we rely on household panel data for two countries; we are thus able to control for unobserved heterogeneity via individual household effects and to track changes in household behaviour over time. Second, by making data across countries as comparable as possible, we can explore the importance of the differences in institutional settings for debt incidence, debt outstanding and credit constraints. We also explore the implications for debt holding from consumption models, including a numerically solved precautionary savings model. We find that inter-country differences are substantial and remain even after controlling for a host of observable characteristics. This points to institutional differences between the countries being important.

Keywords: debt and credit, borrowing constraints, permanent income, panel data, international comparison

JEL Classification: C33, D12, D14, D91, G21, O57

Suggested Citation

Crook, Jonathan N. and Hochguertel, Stefan, US and European Household Debt and Credit Constraints (November 2007). Tinbergen Institute Discussion Paper No. 2007-087/3, Available at SSRN: or

Jonathan N. Crook (Contact Author)

University of Edinburgh - Business School ( email )

University of Edinburgh
29 Buccleuch Place
Edinburgh, Scotland EH8 9JS
United Kingdom

Stefan Hochguertel

VU University Amsterdam ( email )

Dept Econ (FEWEB)
De Boelelaan 1105
1081HV Amsterdam
+31 20 59 86033 (Phone)
+31 20 59 89870 (Fax)

Tinbergen Institute

Gustav Mahlerplein 117
Amsterdam, 1082 MS

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