Exploratory study of comparison income and individual debt using British Household Panel Survey
Exploratory study of comparison income and individual debt using British Household Panel Survey
The famous saying “keeping up with the Joneses” is a generational behaviour that is still deeply interwoven in the behavioural fabric of our modern-day society. This paper aims to address and contribute to the existing literature by investigating the determinants of individual nonmortgage debt, focusing on the role of comparison income. It also seeks to overcome certain empirical shortcomings by applying Tobit, fixed effects, and Tobit fixed effects regression
models to a UK dataset. The study is motivated by previous research, which suggested the aspiration of borrowers is influential in the debt-decision process. Previous studies did not use empirical methods or UK data, however. Comparison income (the measure of the borrowers’ aspiration) is derived from the Mincer earnings equation. Tobit regression is applied in the cross-section analysis and is pertinent considering the censored nature of the dependent
variable. In the panel analysis, fixed effects and Tobit fixed effects are used to control for unobserved attributes of sampled individuals that may affect demand for debt. Comparison income and non-mortgage debt as well as other economic and demographic variables are positively and significantly associated. The relationship between comparison income and nonmortgage debt suggests the latter may be incurred for status-maintenance purposes.
Ejebu, Ourega-Zoe
4f545ae3-4823-44ab-8d59-185d30929ada
17 April 2018
Ejebu, Ourega-Zoe
4f545ae3-4823-44ab-8d59-185d30929ada
Ejebu, Ourega-Zoe
(2018)
Exploratory study of comparison income and individual debt using British Household Panel Survey.
Review of Economic Analysis.
Abstract
The famous saying “keeping up with the Joneses” is a generational behaviour that is still deeply interwoven in the behavioural fabric of our modern-day society. This paper aims to address and contribute to the existing literature by investigating the determinants of individual nonmortgage debt, focusing on the role of comparison income. It also seeks to overcome certain empirical shortcomings by applying Tobit, fixed effects, and Tobit fixed effects regression
models to a UK dataset. The study is motivated by previous research, which suggested the aspiration of borrowers is influential in the debt-decision process. Previous studies did not use empirical methods or UK data, however. Comparison income (the measure of the borrowers’ aspiration) is derived from the Mincer earnings equation. Tobit regression is applied in the cross-section analysis and is pertinent considering the censored nature of the dependent
variable. In the panel analysis, fixed effects and Tobit fixed effects are used to control for unobserved attributes of sampled individuals that may affect demand for debt. Comparison income and non-mortgage debt as well as other economic and demographic variables are positively and significantly associated. The relationship between comparison income and nonmortgage debt suggests the latter may be incurred for status-maintenance purposes.
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Published date: 17 April 2018
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Local EPrints ID: 475300
URI: http://eprints.soton.ac.uk/id/eprint/475300
PURE UUID: 457a0ece-b75f-4338-a388-ea785d95436e
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Date deposited: 15 Mar 2023 17:31
Last modified: 16 Mar 2023 02:59
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