Household repayment behavior: The role of social capital and institutional, political, and religious beliefs

- We examine the influence of social capital and various beliefs on household arrears.
- Arrears associate with corruption beliefs and confidence in institutions.
- We use historical differences in institutions to identify the role of social capital.
- High stocks of social capital reduce the likelihood of arrears.
- This influence is estimated net of household characteristics and country fixed effects.

We examine the influence of social capital and various prevailing beliefs on household repayment behavior in Europe, after accounting for household-specific characteristics and country differences in institutions. Arrears are more common among households living in regions with dense corruption beliefs, low confidence in institutions and authorities, and a low fraction of religious people. Moreover, high stocks of social capital reduce the likelihood of arrears, net of the influence of various potentially relevant factors. Households in these communities face a higher hazard of losing standing in the group and access to the positive externalities of social capital.