Triggers and Determinants of Severe Household Indebtedness in Germany

30 Pages Posted: 30 Nov 2009

See all articles by Matthias Keese

Matthias Keese

Ruhr Graduate School in Economics

Multiple version iconThere are 2 versions of this paper

Date Written: November 2009


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.

Keywords: Household finance, debt, overindebtedness, SOEP

JEL Classification: D12, D14, D91

Suggested Citation

Keese, Matthias, Triggers and Determinants of Severe Household Indebtedness in Germany (November 2009). Ruhr Economic Paper No. 150. Available at SSRN: or

Matthias Keese (Contact Author)

Ruhr Graduate School in Economics ( email )

Hohenzollernstr. 1-3
Essen, NRW 45128

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