Gauging Households' Debt Tolerance: Evidence from Thailand

Understanding households' debt tolerance has direct implications on policies addressing high household debt in many Asian economies. This study examines the determinants of debt tolerance and assesses the tolerance level among different household segments. It defines the debt tolerance as the ability to cope with debt without suffering from anxiety and provides empirical evidence based on a survey on Thai households in 2013. Using the IV probit model, the findings indicate that factors important to the debt tolerance include not only debt burden and financial cushion but also income security, financial history, and financial discipline. This suggests that addressing the debt tolerance issue requires a multi-faceted approach. It also highlights the relatively low debt tolerance among households in precarious jobs including farmers, general workers and business owners. The results are robust to a number of alternative specifications.