Household Debt: Facts, Puzzles, Theories, and Policies

Abstract

Borrowing decisions affect most households, with large stakes and implications for research subfields as varied as macroeconomics and industrial organization. I review theoretical and empirical work on household debt: its prevalence, level, growth, and composition, as well as various measures of consumer choice and market (in)efficiency, elasticities, and prices, including new evidence on how borrowing heterogeneity affects the distribution of the opportunity cost of consumption. I also discuss opportunities and challenges in policy evaluation. A key takeaway is that puzzles abound, and I highlight numerous avenues for further research.