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.
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.
| Original language | English |
|---|---|
| Pages (from-to) | 181-202 |
| Number of pages | 21 |
| Journal | Review of Economic Analysis |
| Volume | 10 |
| Issue number | 1 |
| Early online date | 17 Apr 2018 |
| Publication status | Published - 2018 |
Bibliographical note
This research was carried out in collaboration with the financial andscientific support group from the College of Art and Social Sciences (CASS) at the University of Aberdeen (Scotland). The comments and suggestions from Professor Ioannis Theodossiou and two anonymous referees from the Review of Economic Analysis were very useful to improving the content of this paper.
Keywords
- non-mortgage debt
- comparison income
- status maintenance
- consumer behaviour
- Tobit
- fixed effects
- panel data
Access to Document
- Exploratory Study of Comparison Income and Individual
© 2018 Ourega-Zoé Ejebu. Licensed under the Creative Commons Attribution - Noncommercial 3.0 Licence (http://creativecommons.org/licenses/by-nc/3.0/). Available at http://rofea.org.