Journal article

Household income requirements and financial conditions

S Tsiaplias, GC Lim

Empirical Economics | Springer (part of Springer Nature) | Published : 2019

Abstract

Understanding the income requirements of households is important for examining why households become financially stressed and liquidity constrained. Our econometric approach relies on actual incidences of household-specific financial stress to determine household income requirements. Using an extensive longitudinal dataset of Australian households, we find significant lifecycle effects in income requirements and identify the household types which benefit or are disadvantaged by the typical 30% debt to income measure of financial stress. We also find that, in general, households are locked into tight spending patterns such that, with the exception of households in the top income quintile, fin..

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Funding Acknowledgements

We thank two anonymous referees, an associate editor, the editor Michael Lechner, members of the HILDA team Mark Wooden and Roger Wilkins, Andrew J. Rettenmaier and participants at the Southern Economic Association 85th annual meeting and participants at the 2016 Department of Social Services (Australia) Longitudinal Data Conference for helpful comments and suggestions. This paper uses unit record data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey. The HILDA Project was initiated and is funded by the Australian Government Department of Social Services (DSS) and is managed by the Melbourne Institute of Applied Economic and Social Research (Melbourne Institute). The findings and views reported in this paper, however, are those of the authors and should not be attributed to either DSS or the Melbourne Institute..