Economic Hardship, Housing Cost Burden and Tenure Status: Evidence from EU-SILC
- 419 Downloads
The primary goal of this study is to contribute on the literature on poverty by looking at household economic hardship in relation to the housing cost burden. Being one of the most significant outlays in a household balance, housing costs may indeed cause households to reduce non-housing expenditure such as health care, education, food, and clothing, thus creating serious household economic hardship. Using microdata from the European Union Statistics on Income and Living Conditions dataset (EU-SILC) regarding five European countries (Italy, Germany, UK, Spain, and France) we have examined the predictive power of housing costs in explaining family economic hardship. Furthermore, we have jointly estimated the effect of the housing cost burden upon economic hardship for renters versus home-owners paying mortgages. Results showed that housing costs represent a non negligible burden in all the five European countries. Moreover, home ownership was found to significantly reduce household hardship status.
KeywordsFinancial distress Household finance Housing cost burden Tenure status
JEL ClassificationD12 D14 C24
- Alessie, R., Hochguertel, S., & Van Soest, A. (2002). Household portfolios in the Netherlands. In L. Guiso, M. Haliassos, & T. Jappelli (Eds.), Household portfolios (pp. 341–388). Cambridge: MIT Press.Google Scholar
- Banks, J., Blundell, R., Oldfield, Z., & Smith, J. P. (2004). House price volatility and housing ownership over the life cycle (UCL Discussion Papers in Economics 04–09). University College London: London, UK. Retrieved from http://discovery.ucl.ac.uk/2561/1/2561.pdf?origin=publication_detail.
- Banks, J., Blundell, R., & Smith, J. P. (2003). Wealth portfolios in the US and the UK. In D. Wise (Ed.), Perspectives on the economics of ageing (pp. 205–246). Chicago: Chicago University Press.Google Scholar
- Bardone, L., & Guio, A.C. (2005). In-work poverty, in Eurostat (ed.), Statistics in Focus-Population and Social Conditions (publication no. 5/2005), Luxembourg, EUROSTAT. Retrieved from http://ec.europa.eu/employment_social/social_inclusion/docs/statistics5-2005_en.pdf.
- Benito, A., (2007) Housing equity as a buffer: evidence from UK households (Working paper no. 324). Retrieved from http://www.bankofengland.co.uk/research/Documents/workingpapers/2007/WP324.pdf.
- Boarini, R., & d’Ercole, M. M. (2006). Measures of material deprivation in OECD Countries (No. 37). OECD Publishing. doi: 10.1787/866767270205.
- Boeri T., & Brandolini A. (2005). The age of discontent: Italian households at the beginning of the decade, (IZA discussion paper No. 1530). Retrieved from http://iza.org/dp1530.pdf.
- Brandolini, M., Coroneo, F., Giarda, E., & Moriconi, C., & See, S.G. (2013). Differences in perceptions of the housing cost burden among European countries (Nota di lavoro Prometeia 2010-01). Retrieved from Prometeia website: http://www.prometeia.it/it-it/ricerca/note-di-lavoro.aspx?idC=63274&LN=it-IT.
- Charles, K.K., Hurst, E., & Roussanov, N.L. (2007). Conspicuous consumption and race, (NBER Working Paper No. W13392). Retrieved from NBER website: http://www.nber.org/papers/w13392.pdf?new_window=1.
- Childers, T.L., & Rao, A.R. (1992). The influence of familial and peer-based reference groups on consumer decisions. Journal of Consumer Research, 19(2), 198–211. Retrieved from http://www.jstor.org/stable/2489328.
- European Foundation for the Improvement of Living and Working Conditions (EUROFUND) (2010) Working Poor in Europe. Retrieved from EUROFUND website: http://www.eurofound.europa.eu/pubdocs/2010/25/en/1/EF1025EN.pdf.
- EUROSTAT (2002) European Social Statistics. Income, Poverty and Social Exclusion: 2nd Report, European Commission, Luxembourg. Retrieved from http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-BP-02-008/EN/KS-BP-02-008-EN.PDF.
- EUROSTAT, (2013) Handbook of residential property prices, 2013. Retrieved from http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-RA-12-022/EN/KS-RA-12-022-EN.PDF.
- Fusco A., (2012) The relationship between income and housing deprivation in Luxembourg: a longitudinal analysis (Working Paper Series 2012-10). Retrieved from CEPS/INSTEAD website: http://www.ceps.lu/?type=module&id=104&tmp=1822.
- Georgarakos, D., Lojschova, A., & Ward-Warmedinger, M. (2010). Mortgage Indebtedness and Household Financial Distress. Working Paper series No. 1156, European Central Bank.Google Scholar
- Kurz, K., & Blossfeld, H. P. (2004). Home ownership and social inequality in comparative perspective. Stanford: Stanford University Press.Google Scholar
- Labeaga, J.M., Molina J.A., & Navarro M. (2007) Income satisfaction and deprivation in Spain (IZA Discussion Paper no.2702). Retrieved from IZA website: http://hdl.handle.net/10419/34552.
- Layte, R., Nolan, B., & Whelan, C.T. (2001). Reassessing income and deprivation approaches to the measurement of poverty in the Republic of Ireland. Economic and Social Review, 32(3), 239–262. Retrieved from http://www.esr.ie/ESR_papers/vol32_3/Vol32_3RLayte3.pdf.
- Maddala, G. (1996). Limited-dependent and qualitative variables in econometrics. Cambridge: Cambridge University Press.Google Scholar
- Mammen, S., Dolan, E., & Seiling, S.B. (2014). Explaining the poverty dynamics of rural families using an economic well-being continuum. Journal of Family and Economic Issues. Advance online publication. doi: 10.1007/s10834-014-9405-4.
- Marx, I., & Verbist, G. (1998). Low-paid work and poverty: a cross-country perspective. In S. Bazen (Ed.), Low-wage employment in Europe (pp. 63–86). Cheltenham: Edward Elgar.Google Scholar
- Miranda, A., & Rabe-Hesketh, S. (2006). Maximum likelihood estimation of endogenous switching and sample selection models for binary, ordinal, and count variables. Stata Journal, 6(3), 285–308. Retrieved from http://www.stata-journal.com/article.html?article=st0107.
- Peña-Casas R., & Latta M. (2004). Working poor in the European Union, European Foundation for the Improvement of Living and Working Conditions, Dublin. Retrieved from http://www.eurofound.europa.eu/pubdocs/2010/25/en/1/EF1025EN.pdf.
- Pittini, A., & Laino, E. (2011). Housing Europe review: The nuts and bolts of European social housing systems, CECODHAS Housing Europe’s Observatory, Brussels. Retrieved from http://archive.housingeurope.eu/archive.housingeurope.eu/uploads/file_/HER%202012%20EN%20web2_1.pdf.
- Townsend, P. (1979). Poverty in the United Kingdom. Harmondsworth: Penguin.Google Scholar
- US Department of Housing and Urban Development, Office of Policy Development and Research (2007). Affordable housing needs 2005: Report to Congress. Washington, DC: Government Printing Office. Retrieved from http://www.huduser.org/Publications/pdf/AffHsgNeeds.pdf.