Avoiding material hardship: The buffer function of wealth

Rodems, Richard; Pfeffer, Fabian T.

doi:10.1177/09589287211059043

Cited by 27 publications

(16 citation statements)

References 53 publications

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“…This exemplifies the insurance function of wealth in the case of educational choices. In this vein, Rodems and Pfeffer (2021) were able to show that the relationship between disruptive life events, e.g., divorce, disability, or income loss, and the likelihood of experiencing material hardship strongly depends on households' wealth. They conclude that higher household wealth provides an effective private safety net to buffer adverse life events.…”

Section: Property As Insurance Against the Financial Risks Of Unemplo...mentioning

confidence: 98%

Is Property an Insurance or an Additional Burden? Financial Stress Among Homeowners in Europe

Heidenreich

Broschinski

2022

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A crucial function of wealth is to protect individuals from the consequences of adverse life events. However, sometimes wealth also implies additional financial risks. In addition to the insurance function of homeownership (the most common form of wealth), we therefore also examine financial squeezes that reflect the indebtedness and social embeddedness of homeowners and limit their options for dealing with social risks. A third hypothesis expects a trade‐off between social protection and homeownership. Taking the example of unemployment, we examine the effects of short‐term unemployment on the perceived financial situation of households based on data derived from EU‐SILC for 27 European countries. It can be shown that debt‐free homeownership reduces financial stress in the case of unemployment compared to tenants and indebted owners. A debt‐free home thus offers an additional buffer and insurance against the financial consequences of unemployment. However, indebted homeowners are particularly hard hit by unemployment because they have to use all their financial resources to pay off their mortgages. Finally, we did not find a trade‐off but a cumulation of advantages due to homeownership and generous unemployment benefits in countries with high net replacement rates.

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Section: Property As Insurance Against the Financial Risks Of Unemplo...mentioning

confidence: 98%

Is Property an Insurance or an Additional Burden? Financial Stress Among Homeowners in Europe

Heidenreich

Broschinski

2022

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“…Research on the buffer function of wealth points towards an important role of private assets in moderating the effects of adverse life events. For instance, Rodems and Pfeffer (2021) show that the link between material hardship and disruptive life events, such as income loss and divorce, depends crucially on household asset endowments. While results are more mixed when the moderating effect of wealth on the link between shocks and subjective outcomes is considered (Kuhn & Brulé, 2019), significant cross-country heterogeneity may make general conclusions more challenging (Müller et al, 2021).…”

Section: Rethinking Asset Povertymentioning

confidence: 99%

Wealth and Welfare: Do Private and Public Safety Nets Compensate for Asset Poverty?

Rapp

Humer²

2023

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Economic shocks test the resilience of families around the world. Lockdowns, extended periods of unemployment, and inflation challenge the capabilities of private households to maintain their living standards whilst keeping their budgets in balance. Asset poverty is a concept invoked frequently to measure the capacity of private households to mitigate income loss by relying exclusively on their savings. In contrast to conventional asset poverty measures, we quantify the combined cushioning effect of private and public safety nets. Highlighting the importance of public safety nets and familial networks, this article devises a modified concept of asset poverty: Rather than purely simulating a household’s asset decumulation without replacement income, the modified indicator accounts for replacement income in a static setting. The empirical assessment of modified asset poverty in Europe and America combines harmonised microdata on household finances with simulations of institutional rules set by social insurance systems. Our results reveal how differences in social relations and institutional rules shape cross‐country variation in the vulnerability of private households. We find that, in contrast to the US, where the asset poverty of families is particularly low, households in most European countries are less vulnerable because generous social security systems coexist with low private assets. However, in some European countries, benefit generosity decreases the longer income losses last, exposing time dynamics in vulnerability. Complementing social insurance mechanisms, in countries such as Greece, households are more likely to receive financial support from family or friends. Cross‐national heterogeneity in vulnerability suggests that a shock may have different implications across countries.

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“…Extant sociological research on wealth as a predictor of social inequalities has largely focused on socioeconomic outcomes and individual-level disruptive events (e.g., Rodems & Pfeffer, 2021). Instead, we aim to investigate psychological or socioemotional outcomes in response to a disruptive contextual-level event, that is, the Covid-19 pandemic.…”

Section: Introductionmentioning

confidence: 99%

The Buffer Function of Wealth in Socioemotional Responses to Covid‐19 in Italy

Gritti

Gioachin²,

Zamberlan³

2023

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The social stratification of material consequences of individual‐level disruptive events is a widely researched topic. Less is known about the stratification of psychological outcomes in response to contextual‐level disruptive events. We aim to fill this gap by investigating the aftermath of the Covid‐19 pandemic on individuals’ dispositional optimism and the stratification based on unequal wealth resources. The study focuses on Italy, the first European country to be strongly hit by Covid‐19, and one characterised by high levels of private savings and homeownership. Theoretically, we draw on the conventional social inequalities framework informed by insights from the literature on natural disasters, positing that wealth‐related resource disparities may have stratified the socioemotional response to the pandemic. Empirically, we leverage a combination of individual‐level longitudinal survey data (Bank of Italy’s Special Survey of Italian Households) and municipality‐level official statistics on excess mortality (Italian National Institute of Statistics), covering the first 17 months of the Covid‐19 pandemic in Italy. Results indicate overall negative consequences of severe exposure to risks associated with the pandemic on optimism. However, we found evidence in line with a post‐traumatic growth scenario, as optimism slightly increased over the course of the pandemic. The insurance function of wealth emerges in the higher optimism of individuals with more resources. Nevertheless, resource disparities are not translated into stark differences in susceptibility to risk exposure or post‐traumatic growth. Overall, our findings support a limited insurance function of wealth in the socioemotional sphere.

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Avoiding material hardship: The buffer function of wealth

Cited by 27 publications

References 53 publications

Is Property an Insurance or an Additional Burden? Financial Stress Among Homeowners in Europe

Is Property an Insurance or an Additional Burden? Financial Stress Among Homeowners in Europe

Wealth and Welfare: Do Private and Public Safety Nets Compensate for Asset Poverty?

The Buffer Function of Wealth in Socioemotional Responses to Covid‐19 in Italy

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