1、 1 外文翻译 The Determinants of Consumer Credit:A Review of the Literature Material Source: Consumer Credit in Europe Author: Daniela Vandone 1 Introduction The literature of consumer credit is sizeable. Such a body of work reflects notonly the composite nature of unsecured debt, but also the fact that
2、differentmethodological approaches exist depending on the research questions under analysis and the objectives sought.Four main approaches can be seen: a management approach, which focuses on the characteristics of the credit industry, its workings and the policies adopted by supply-side players; a
3、legal approach, which investigates the impact the regulatory framework has on competition and consumer protection; a socio-psychological approach, which analyses how individuals are affected by consumption behaviour and indebtedness choices; an economic approach, which for the most part concentrates
4、 on the determinants of the demand for and supply of consumer credit and on an analysis of the characteristics of individuals and households in debt. In this chapter we will discuss the economic approach with the aim of providing an outline of the individual and institutional factors that are consid
5、ered in the literature as determinants of consumer credit.The economic models referred to are based on the economic rationality of individuals, who seek to increase living standards by smoothing consumption over different periods of their lives through saving and borrowing decisions. According to th
6、ese models, consumer credit demand and supply is determined by individual factors. 2 The Life-Cycle and Permanent Income Theories The theoretical economic framework for consumption, saving and indebtedness decisions is developed within the Life-Cycle theory, developed by Modigliani and Brumberg in 1
7、954, and the Permanent Income Hypothesis, proposed by Friedman in 19571. The central idea of these intertemporal consumption choice models is that 1 Although the two theories use different economic models, both envisage similar consumption behaviour patterns. For the purposes of this work, therefore
8、, the names of both will be considered as equivalents. 2 households make their consumption choices (and consequently those relating to saving and indebtedness) on the basis of their wealth, current disposable income and future income expectations so as to guarantee a uniform level of consumption ove
9、r their lifetimes. The underlying assumption of these models is that income is generally low in an individuals early working life and tends to rise towards retirement. Individuals at the start of their working life, expecting higher future income receipts, finance the purchase of assets in order to
10、raise consumption over the level offered by current income. Nearing the end of their working lives, inversely, individuals raise savings levels in preparation for retirement when spending will be greater than earnings. Within this framework, saving and indebtedness guarantee heightened economic welf
11、are by smoothing out consumption over time. In the “standard theory“, named as such by Modigliani himself, the economic model posits that choices regarding households consumption levels over different periods of their life are subject to an intertemporal budget constraint.Considerable further empiri
12、cal analyses of the theory have stressed the need for the standard model to take into account two additional aspects： Households demand for debt is subject to factors other than income and wealth; households may be “liquidity constrained“. Encompassing these aspects effectively implies the model sho
13、uld address variables that influence both the demand and supply sides of the credit market (Table 1.1). Table 1.1 Consumer credit demand and supply factors CREDIT DEMAND INDIVIDUAL FACTORS CREDIT SUPPLY Socio-demographic Age Education Size and composition of family . Economic Income Wealth Uncertain
14、ty . INSTITUTIONAL FACTORS 3 Efficiency of justice system Information-sharing Informal credit markets . 2.1 Credit Demand Factors With regards to individual factors, empirical analysis has extended the standard model by examining to what extent socio-demographic variables, such as the age of the hea
15、d of the household, the size and make up of the family, and levels of education, influence individuals spending, saving and borrowing choices.2 Consistent with the life-cycle, young people, characterised by expectations of rising income receipts, have a strong demand for credit which, over time, dro
16、ps because income is sufficient to cover spending and with age individuals become more adverse to indebtedness.Indebtedness is higher or the capacity to save is lower also in the case of large families with children at pre-school or school age when in this life-cycle phase spending is typically high
17、. This being said, however, the presence of children may also be an incentive for greater saving in order to satisfy inter-generational asset transfer.Education also has a positive effect on the demand for credit both because it reflects a probable rise in future income and greater job security and
18、reduces the costs of entering the credit market thanks to an enhanced capacity to make informed decisions regarding indebtedness.In addition to the economic variables already included in the original framework, i.e. individuals income and wealth, empirical analysis has extended the model to include
19、also uncertainty about the amount and variability of future income. Such uncertainty determines the need to retain liquidity as a precaution against income falls or unexpected increases in liabilities, with a subsequent increase in saving and a reduction in the demand for credit. Turning to institut
20、ional factors, the literature identifies three in particular: the extent of information-sharing amongst financial institutions regarding the level of borrowers credit risk, the efficiency of the justice system in taking steps against insolvent individuals, and the size of the informal credit market.
21、Institutional factors influence the demand for credit by creating the conditions for the market to sanction opportunistic behaviour. The decision to repay a loan depends in fact not only on the 2 The term “household“ refers in the literature both to an individual and a family with personal loan comm
22、itments. For this reason when reference is made in this work to “household unsecured debt“ the terms individual“ and family“ are considered as synonyms. 4 capacity, but also on the willingness of an individual to respect the contractual obligations undersigned. Put another way, a household may decid
23、e to take out a loan not as a way of anticipating spending based on expectations of increased future income receipts, but because he/she knows that the loan will not be repaid; a phenomenon aptly termed as “strategic insolvency“ (Gropp et al. 1997). information-sharing mechanisms amongst lenders red
24、uce a households incentive to over-borrow by demanding credit to more than one institution at the same time as each lender will be in a position to know the applicants total system-wide exposure.With regards to the efficiency of the justice system, the probability of late payments or insolvency incr
25、eases when credit recovery procedures are costly and lengthy.Turning to the third institutional factor the role of informal credit markets individuals who have access to loans from relatives and friends will regard the possible exclusion from formal credit circuits as less problematical thanks to th
26、e fact that when in need they can always turn to informal credit solutions. 2.2 Credit Supply Factors The standard model assumes that there are no constraints on the part of the household to obtain credit. The amount of the loan, however, is either subject to a ceiling or the level of interest rates
27、 applied by lenders may reduce or cancel the demand for credit, so forcing households to limit their spending to the resources available. Credit constraints are widely viewed in the literature as deriving from the existence of asymmetric information between borrowers and lenders; such informational
28、imperfections force lenders to take steps to avoid approving loans that will subsequently not be repaid. In turn, credit availability by financial intermediaries depends on an individuals socio-demographic and economic characteristics as well as his/her institutional setting. As to individual factor
29、s, high income and wealth levels combined with conditions of stable employment increase the supply of credit offered by lenders. With regards to the impact of institutional factors on the supply side, two of the three factors previously mentioned in the analysis of the demand side are particularly s
30、ignificant: the efficiency of the justice system and the existence of information-sharing mechanisms. An efficient justice system allows lenders to recover non-performing loans rapidly at contained costs. This is clearly the case with secured debt exposures: delays and difficulties in obtaining the
31、repossession of mortgaged property act as disincentives for lenders to extend their mortgage loan 5 portfolio. The same institutional factor may also have an impact on the supply of unsecured credit: in this case, the disciplinary effect on insolvent individuals is represented by information concern
32、ing them and collected by credit bureaus that may damage their prospects of accessing the credit market again in the future. In such a scenario, the availability of credit is affected by the existence amongst lenders of information-sharing mechanisms which are used in building up customer credit-ris
33、k profiles and which therefore reduce asymmetric information. 3 Empirical Findings Empirical analyses aimed at studying the determinants of household credit markets and their coherence with Life-Cycle and Permanent Income models focus on the following areas, according to the research questions they
34、investigate: Participation in the credit market Level of borrowing Cross-country characteristics Risk of over-indebtedness Credit constraints Work across these areas examines both individual and institutional variables. Analysis has typically concentrated on the demand side, though a branch of study
35、 has used economic models to investigate the determinants of the supply of consumer credit (Table 1.2). Table 1.2 The literature of household credit Topic area Authors Year Participation in the Crook 2006 credit market Grant, Padula 2006,2007 Casolaro, Gambacorta, Guiso 2006 Jappelli, Pagano 2006 Du
36、ygan, Grant 2008 Level of borrowing Magri 2002,2007 Fabbri, Padula 2004 Del Rio, Young 2005 Cross-country Bianco, Jappelli, Pagano 2002 characteristics Crook 2006 Crook, Hochguertel 2007 6 Risk of over- Bridges, Disney 2004 indebtedness Del Rio, Young 2005 Rinaldi, Sanchez-Arellano 2006 Credit const
37、raints Cox, Jappelli 1993 Ferri, Simon 2000 Magri 2002,2007 Fabbri, Padula 2004 Crook 2006 Bicakova 2007 3.1 Participation in the Credit Market Empirical analyses in this area indicate the determinants of households participation in the credit market. Amongst socio-economic factors examined within t
38、he individual category, the age profile as a determinant of having unsecured debt is consistent with the lifecycle model of consumption: young people are more likely to borrow than members of older age groups (Crook 2006; Fabbri and Padula 2004), with the percentage of individuals with unsecured deb
39、t peaking for individuals aged between 30 and 40 years of age (Del Rio and Young 2005a; Magri 2007). With regards to household size, Fabbri and Padula (2004) find that there is a positive relation between levels of indebtedness and the number of household members. Similarly, Del Rio and Young (2005)
40、 and Crook (2006) show that married individuals are more likely to have unsecured debt than the non-married. Having higher educational qualifications is associated with a higher probability of having unsecured debt. Levels of education in general can reasonably be seen to have a positive impact on i
41、ndividuals financial knowledge: the higher this level of knowledge is, the easier it is to access and evaluate financial products and services. Turning to economic factors, the income variable is of significant importance. Demand for credit is positively influenced by expectations of increased futur
42、e receipts, as posited by the life-cycle theory: if there were no expectations of increased income in the future, there would be no need to advance spending via debt (Ferri and Simon 2000; Crook 2005; Cox and Jappelli 1993). Findings differ with regards to low income as a factor for indebtedness: De
43、l Rio and Young (2005a) show that there is less probability of the poorer paid having debt due to the fact that low earnings are typically associated with highly unstable employment conditions that 7 tend to reduce both the demand for and the supply of credit. The percentage of households that have
44、debt is higher for those with limited net wealth. In fact, results in the literature show that households with high net wealth are able to satisfy their consumption needs autonomously without recourse to debt. However, households with intermediate wealth levels are more likely to participate in the
45、consumer credit market due to increased spending patterns that characterise improvements in life style. Del Rio and Young (2005a) focus their analysis on households with a portfolio of financial assets and find that households that do not own such a portfolio have a greater probability of having uns
46、ecured debt than those who do. Moving to institutional factors, analysis has focused on the probability of lenders having their loans repaid. Studies show how the probability of default is negatively correlated with the level of efficiency of the justice system and the existence of effective informa
47、tion-sharing mechanisms, whilst positively correlated with the existence of informal credit markets. 3.2 Level of Borrowing As far as this second research area, i.e. the amount of debt held by households, among individual factors age does not appear to influence the level of borrowing, whilst the le
48、vel of educational qualifications is positively correlated. As regards economic variables, Fabbri and Padula (2004) show that income and wealth levels have a positive effect on the amount of unsecured debt an individual is likely to have. With reference to labour market status, Magri (2007) finds th
49、at the amount of consumer credit is higher for the self-employed and suggests this is because individuals in this category use unsecured debt also as a means of funding their work activities. The impact of institutional variables does not differ from those illustrated in the first topic area(Sect. 1.3.1): the existence of inefficient systems of justice, ineffective information-sharing mechanisms and extensive informal credit markets not only increases the probability of participation in the credit market, but also the amount of
