Consumer debt: Implications for consumption behavior of households in the United States
Shim, Young
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Permalink
https://hdl.handle.net/2142/19719
Description
Title
Consumer debt: Implications for consumption behavior of households in the United States
Author(s)
Shim, Young
Issue Date
1991
Doctoral Committee Chair(s)
Magrabi, Frances M.
Department of Study
Human and Community Development
Discipline
Human and Community Development
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Education, Home Economics
Economics, General
Language
eng
Abstract
The purpose of this study was to conceptualize the effect of debt load on consumption behavior of households; specifically, it was to examine whether consumer debt load is related to total consumption expenditure and to consumption expenditure pattern. The data were taken from the 1988 Consumer Expenditure Survey. The sample consisted of 1,649 households. Total consumption expenditure was defined as total purchases in current period. Consumption expenditure pattern was defined as the relationship among budget shares allocated to fifteen consumption expenditure categories. Consumer debt load was grouped into three range, zero, low and high. Ordinary least square regression analysis was used to test the relationships between consumer debt load and consumption expenditure, taking into account income, wealth-income ratio, age of householder, education of householder, occupation of householder, race of householder, household type, household size, housing tenure, and urbanization.
Consumer debt load was found to be positively related to total consumption expenditure. The higher the level of consumer debt load, the higher the total consumption expenditure. Compared with households having low consumer debt load, highly indebted households tended to exhibit a wealth-oriented consumption expenditure pattern. Specifically, households with high consumer debt load allocated higher budget share to transportation. Households with zero consumer debt load showed necessity-dominated consumption expenditure pattern, allocating higher budget shares to low income-elastic consumption expenditure categories.
The findings of this study suggest that in 1988 households with high consumer debt load did not behave as if they had a decrease in an income. The idea that households cut back on borrowing when their consumer debt load becomes high, because consumer debt will lower their subsequent ability to spend, may be too simplistic. Policy efforts to achieve financial stability of households and thus enhance their level of living through consumption need to consider structural factors that may be associated with fluctuations in household indebtedness.
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