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The impact of household debt burden on consumption: new evidence
https://doi.org/10.32609/0042-8736-2025-12-97-115
Abstract
This paper provides empirical confirmation of the hypothesis that households’ debt burden negatively affects their consumption. We used representative data from the longitudinal All-Russian household survey on consumer finance. It is shown that consumer spending is positively determined by the behavioral characteristics of the head of household — control of spending, financial literacy and the ability to adapt to changing conditions. Under-reporting of household income leads to the decrease of consumption inequality among households. In addition, the data confirm the assumption of a “debt overhang” associated with possible credit constraints and precautionary savings motive, due in part to the fact that the sample covers both the COVID period and the period of 2022—2024. Households prefer to reduce consumer spending in order to direct the freed-up income to debt servicing and/or savings to insure against income shocks, which is consistent with Carroll’s buffer-stock theory. The presented econometric models and results are comprehensively assessed on the microdata for Russia for the first time.
Keywords
household,
debt burden,
consumer spending,
panel data,
behavioral characteristics,
under-reporting income
JEL: C23, C24, C26, D12, G51, G53
About the Author
S. V. Arzhenovskiy
Bank of Russia
Russian Federation
Russian Federation
Sergey V. Arzhenovskiy
Rostov-on-Don
References
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For citations:
Arzhenovskiy S.V. The impact of household debt burden on consumption: new evidence. Voprosy Ekonomiki. 2025;(12):97-115. (In Russ.) https://doi.org/10.32609/0042-8736-2025-12-97-115
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