Household Financial Portfolios in an Emerging Economy—The Case of Chile

This paper investigates household financial portfolios in Chile. We use latent class models to identify groups of households according to their financial behavior. The model reveals nine distinct behavioral groups. The two largest groups account for 40% of the population and represent mostly households lacking access to banking sector services. Overall, we find strong evidence of households mixing assets and debt, which contradicts the classical assumptions of the life-cycle theory. We demonstrate that a significant share of indebted households has credit in the informal sector even though they were able to save on regular basis and thus should seek credit in the formal market. Education debt seems to be equally present among different socio-economic groups.