Does Income Gap Matter for Household Debt Accumulation?

Authors

  • Mohd Afzanizam Abdul Rashid Universiti Kebangsaan Malaysia
  • Tamat Sarmidi Universiti Kebangsaan Malaysia
  • Abu Hassan Shaari Md Nor Universiti Kebangsaan Malaysia
  • Nor Ghani Md Noor Universiti Kebangsaan Malaysia

Keywords:

Conspicuous Consumption and Social Interactions, Credit Ratio, Household Debt, Income Gap

Abstract

The rise in household debt raises the question: what really causes people to take on more debt when they have to serve the cost of borrowings for the rest of their lives? It appears that households are willing to trade their financial freedom for something that is more precious at a time when the gap between the rich and the poor is widening. In this regards, our main objective is to investigate the relationship between household debt and income gap. The understanding of this issue may give good insights as to how household would make decisions to leverage their balance sheet. This is particularly true in the context of “keeping up with the Jones’s” which provides the theoretical framework of such phenomenon while greater access to credit would facilitate the process. In this research, the Generalized Methods of Moments (GMM) technique is employed for 55 countries and covers the period from 2000 to 2012. The results showed that there is a significant positive relationship between income gap and household debt. In addition, the level of indebtedness is deemed to be persistent throughout our sample countries, suggesting that households will remain in debt-trap.

Downloads

Download data is not yet available.

Downloads

Published

2017-07-12

How to Cite

Abdul Rashid, M. A., Sarmidi, T., Md Nor, A. H. S., & Md Noor, N. G. (2017). Does Income Gap Matter for Household Debt Accumulation?. Institutions and Economies, 9(1), 1–19. Retrieved from https://samudera.um.edu.my/index.php/ijie/article/view/5055

Issue

Volume 9, Issue 1 (2017)

Section

Articles

License

Submission of a manuscript implies: that the work described is original, has not been published before (except in the form of an abstract or as part of a published lecture, review, or thesis); that is not under consideration for publication elsewhere; that its publication has been approved by all co-authors, if any, as well as tacitly or explicitly by the responsible authorities at the institution where the work was carried out. Transfer of copyright to the University of Malaya becomes effective if and when the article is accepted for publication. The copyright covers the exclusive right to reproduce and distribute the article, including reprints, translations, photographic reproductions, microform, electronic form (offline and online) or other reproductions of similar nature.
An author may self-archive the English language version of his/her article on his/her own website and his/her institutions repository; however he/she may not use the publishers PDF version which is posted on www.ijie.um.edu.my. Furthermore, the author may only post his/her version, provided acknowledgement is given to the original source of publication and a link must be accompanied by the following text: The original publication is available at www.ijie.um.edu.my.

All articles published in this journal are protected by copyright, which covers the exclusive rights to reproduce and redistribute the article (e.g. as offprint), as well as all translation rights. No material published in this journal may be reproduced photographically or stored on microfilm, in electronic database, video disks, etc., without first obtaining written permission from the publishers. The use of general descriptive names, trade names, trademarks, etc., in this publication, even if not specifically identified, does not imply that these names are not protected by the relevant laws and regulations.

The copyright owners consent does not include copying for general distribution, promotion, new works, or resale. In these cases, specific written permission must first be obtained from the publishers.