On the relationship between welfare and household debt.
Martino Comelli
martcomelli@mrtno.com
PhD student in Sociology
SciencesPo, Paris
The aim of this article is to explain the different levels of private indebtedness
in a number of selected countries. Previous sociological literature has tried to
explain indebtedness by the quantity of welfare spending, searching for a
relation between the lack of welfare and the increase of household-debt. In
this theoretically oriented paper, I argue that to understand the influence of
welfare on debt, the quality of welfare spending matters more than the
quantity. The institutional qualities of different welfare regimes may influence
people, making them more or less risk adverse towards borrowing money. In
northern countries, higher debt ratios are more common because social
protection is more extensive, while in continental countries, where welfare
benefits are more narrow and and tend to target the already employed and the
elderly, people are more risk adverse toward debt. The proposed theory is
supported by an illustrative empirical analysis using data from the LIS and
Comparative Welfare Entitlements Dataset.
