Over-indebtedness and its persistence in rural households in Thailand and Vietnam

authored by

Bezawit Beyene Chichaibelu, Hermann Waibel

Abstract

This study analyzes the determinants of household over-indebtedness and its persistence for rural household borrowers in Thailand and Vietnam. A household is considered to be over-indebted if it is in default or arrears on a loan or if its ratio of debt service to income exceeds 50 percent. The persistence of over-indebtedness was tested using a Heckman random effects dynamic probit model controlling for the effect of household demographic, socioeconomic, and behavioral characteristics. For Thailand, but not for Vietnam, past experience of over-indebtedness increases the probability of being over-indebted in the present, controlling for other household characteristics. Village support systems in Vietnam may be more effective in delivering households out of over-indebtedness than in Thailand where heavy debt burdens are taken more for granted. Household characteristics that significantly increase the probability of over-indebtedness include poverty, household size, low education, overly optimistic forecasting of income, and a sense of being less well off than other villagers.

Organisation(s)

Institute of Development and Agricultural Economics

External Organisation(s)

International Fund for Agricultural Development (IFAD)

Type

Article

Journal

Journal of Asian Economics

Volume

56

Pages

1-23

No. of pages

23

ISSN

1049-0078

Publication date

06.2018

Publication status

Published

Peer reviewed

Yes

ASJC Scopus subject areas

Finance, Economics and Econometrics

Sustainable Development Goals

SDG 8 - Decent Work and Economic Growth

Electronic version(s)

https://doi.org/10.1016/j.asieco.2018.04.002 (Access: Closed)