Household Debt and Social Interactions

50 Pages Posted: 1 Feb 2013

See all articles by Dimitris Georgarakos

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research; Center for Financial Studies (CFS)

Michael Haliassos

Goethe University Frankfurt - House of Finance; Goethe University Frankfurt - Faculty of Economics and Business Administration; CEPR; NETSPAR

Giacomo Pasini

Ca' Foscari University Venice; Netspar

Multiple version iconThere are 5 versions of this paper

Date Written: December 2012

Abstract

Debt-induced crises, including the subprime crisis, are usually attributed exclusively to supply-side factors. We examine the role of social influences on debt culture, emanating from perceived average income of peers. Utilizing unique information from a household survey, representative of the Dutch population, that circumvents the issue of defining the social circle, we consider collateralized, consumer, and informal loans. We find robust social effects on borrowing - especially among those who consider themselves poorer than their peers - and on indebtedness, suggesting a link to financial distress. We employ a number of approaches to rule out spurious associations and to handle correlated effects.

Keywords: consumer credit, household debt, Household finance, informal loans, mortgages, social interactions

JEL Classification: E21, G11

Suggested Citation

Georgarakos, Dimitris and Haliassos, Michael and Pasini, Giacomo, Household Debt and Social Interactions (December 2012). CEPR Discussion Paper No. DP9238. Available at SSRN: https://ssrn.com/abstract=2210207

Dimitris Georgarakos (Contact Author)

European Central Bank (ECB) - Directorate General Research ( email )

Sonnemannstrasse 20
Frankfurt am Main, 60314
Germany

Center for Financial Studies (CFS) ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Michael Haliassos

Goethe University Frankfurt - House of Finance

Theodor-W.-Adorno-Platz 3
PF H32
Frankfurt am Main, 60323
Germany

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 3
PF H32
Frankfurt am Main, D-60323
Germany

CEPR

London
United Kingdom

NETSPAR ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Giacomo Pasini

Ca' Foscari University Venice ( email )

Cannaregio 873
Venice, 30121
Italy
+39 041 234 9171 (Phone)
+39 041 2349176 (Fax)

HOME PAGE: http://venus.unive.it/pasinigi

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.netspar.nl/people/researchfellows/pasini/

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