Abstract
This paper investigates the profile of the Greek bankrupt households and is the first to deal with the bankrupt households in Greece utilizing court data from the judicial decisions according to the newly established personal Bankruptcy Law 3869/2010. We compare the characteristics of the bankrupt households drawn from the court data with those of a control group of households without financial difficulties constructed from the EU-SILC database. Our findings indicate that income and/or job loss, family breakup, and women with children are important characteristics related to bankruptcy. We also find that although the median of the household disposable income of the bankrupt households is lower than that of the households without financial difficulties, the former do not fall below the poverty line at a greater rate than the latter, in all household size instances. This finding is in line with the results of earlier studies indicating that bankruptcy is not a poor household’s issue. The results are confirmed using logistic regression relating the probability of bankruptcy to a set of socioeconomic measures.
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Notes
In order to conduct statistical comparisons, the two samples must be independent. By removing all those households in the range of facing financial difficulties, we eliminate the risk of including a household that might have been bankrupt into the control group. See the methodological section.
We follow the definition of the households in financial difficulties that is suggested in European Commission (2008). See the methodological section.
The 13th and 14th salaries (i.e., Christmas, Easter, and vacation allowances, totalling two salaries), were cut from the employees of the public sector and the pensioners, regardless of the sector of prior employment. The Pension Solidarity Contribution Tax was introduced. At the same time, the ability of the already inadequate welfare state to mitigate the effects of the crisis was further reduced by the cuts in social expenditures. For instance, the rent subsidy was halted and only a small minority of the unemployed had access to the unemployment benefits. No safety net was left for the weaker and the most in need (Matsaganis 2011).
AMECO Database.
Source: EU-SILC, 2008.
AMECO.
Ibid.
EU-SILC, 2012, 2011 data.
Social nets substitute social safety nets in countries with weak social welfare state like the countries of the European south. This point is also noted in Lopes and Frade (2012).
The cost of the whole procedure including the lawyers’ remuneration amounts to more or less 1000 euro. This cost is not considered as significant so as to prevent someone from filing. The cost can be reduced if the debtor files through a consumer association where lawyers work on a voluntary basis.
The most fundamental problem in investigating over-indebtedness is the lack of a common definition of the concept of over-indebtedness and a widely accepted methodology of measuring over-indebtedness (Betti et al. 2007; European Commission 2008; Frade and Lopes 2009). This might not be a serious problem when a certain country is examined, but it becomes important when cross-national comparisons are attempted.
Due to legal obstacles (related to the Protection of personal data), only 553 cases were publicly available after they have been subject to anonymization procedures.
Missing data for the variables we use for the statistical comparisons between the two samples, i.e., gender, marital status, age, protected children, basic activity, homeownership, income, debt levels, etc.
We follow the definition used by the tax authorities and define the protected children as all persons in a household aged less than18-years-old, and all young adults aged less that 27-years-old who are students, soldiers or unemployed.
It implies the inadequacy of essential social services which are considered typical in most EU countries. The holes in the social safety net in Greece are enormous. There are not enough social services such as day-care and medical services, thus households are forced to buy these services from the private sector at a cost burdening the household budget. The unemployment benefits are also inadequate as amounts and in duration. Education although public in widely considered as inefficient and parents spent a great amount of money for private tutoring services especially during the high school were students are prepared for the nationally university entrance examinations.
Note that the public sector employees are protected from layoffs. As a result, 71.9% of the bankrupt debtors are employed in the private sector and only 27.0% in the public sector. This is another evidence relating job insecurity and bankruptcy.
Also found in Lamprinidis et al. (2011).
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Part of this study was conducted at the Labour Institute, General Confederation of Greek Workers: Marsellou and Bassiakos (2013). This part was funded by the European Social Fund and the Hellenic Ministry of Labour and Social Security under the Operational Programme “Human Resources Development” 2007–2013.
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Marsellou, E.G., Bassiakos, Y.C. Bankrupt Households and Economic Crisis. Evidence from the Greek Courts. J Consum Policy 39, 41–62 (2016). https://doi.org/10.1007/s10603-015-9309-1
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DOI: https://doi.org/10.1007/s10603-015-9309-1