Keeping Up with the Novaks? Income Distribution as a Determinant of Household Debt in CESEE

46 Pages Posted: 22 Jan 2021

See all articles by Mariya Stankeva Hake

Mariya Stankeva Hake

Oesterreichische Nationalbank (OeNB)

Philipp Poyntner

Vienna University of Economics and Business

Date Written: February 11, 2020

Abstract

This paper constitutes an initial attempt to shed light on the role of income distribution in household debt and financial market access in Central, Eastern and Southeastern Europe (CESEE). Using household-level data from the OeNB’s Euro Survey for the period 2009-2018, we address the question whether interpersonal comparisons (“keeping up with the CESEE Joneses" i.e. "the Novaks”) affect the probability of having and planning a loan. Applying multilevel probit modeling to take into account the hierarchical structure of the data, our results support the notion that higher income inequality is negatively correlated with the probability of having a loan at the bottom of the distribution, and positively at the top. We show this impact for almost all components of household debt, but evidence is strongest for mortgage, car and foreign currency loans. Interpersonal comparisons turn out to drive loan intentions, however, mainly on the very top of the income distribution.

JEL Classification: G0, D1, D3

Suggested Citation

Stankeva Hake, Mariya and Poyntner, Philipp, Keeping Up with the Novaks? Income Distribution as a Determinant of Household Debt in CESEE (February 11, 2020). BOFIT Discussion Paper No. 3/2020, Available at SSRN: https://ssrn.com/abstract=3764758

Mariya Stankeva Hake (Contact Author)

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

Philipp Poyntner

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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