Persistency of financial distress amongst Italian households: evidence from dynamic probit models

Giarda, Elena (2011) Persistency of financial distress amongst Italian households: evidence from dynamic probit models. Bologna, IT: Dipartimento di Scienze Statistiche "Paolo Fortunati", Alma Mater Studiorum Università di Bologna, p. 23. DOI 10.6092/unibo/amsacta/3289. In: Quaderni di Dipartimento. Serie Ricerche ISSN 1973-9346.

This is the most updated version of the document.

Full text available as:
[img]
Preview
PDF (Quaderni_2010_3_Giarda_FinancialDistress3version)
License: Creative Commons Attribution Non-commercial

Download (478kB) | Preview

Abstract

This paper analyses financial distress among Italian households using the longitudinal component of the Bank of Italy Survey on Household Income and Wealth (SHIW) for the period 1998-2006. It aims to test whether the probability of experiencing financial difficulties is persistent over time. First we review the methodologies for estimating dynamic nonlinear panel data models, drawing attention to the problems to be dealt with to obtain consistent estimators. Specific attention is given to the initial condition problem introduced by the presence of the lagged dependent variable in the set of explanatory variables. Second we provide an in-depth discussion of the alternative approaches proposed in the literature - subjective/qualitative versus quantitative indicators - to identify households in financial distress. We define a quantitative measure of financial distress based on the distribution of net wealth. Finally we apply dynamic probit models to test for true state dependence in financial distress. The estimation uses four different methods: the pooled probit; the random effects probit with exogenous initial conditions; the Heckman model; and the more recent Wooldridge model. The results of all the estimators confirm the null hypothesis of true state dependence and show that, in line with the literature, less sophisticated models, namely pooled and exogenous models, tend to over-estimate this persistence.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Giarda, Elena
Keywords
Difficoltà finanziarie delle famiglie; Modelli probit dinamici su dati panel; Indagine Banca d’Italia sui bilanci familiari; Household financial distress; Dynamic probit models; SHIW.
Subjects
ISSN
1973-9346
DOI
Deposit date
25 May 2012 12:00
Last modified
25 May 2012 12:00
URI

Other metadata

Available versions of this document

This work may be freely consulted and used, may be reproduced on a permanent basis in a digital format (i.e. saving) and may be printed on paper with own personal equipment (without availing of third -parties services), for strictly and exclusively personal, research or teaching purposes, with express exclusion of any direct or indirect commercial use, unless otherwise expressly agreed between the user and the author or the right holder. All other rights are reserved. In particular, it is not allowed to retransmit it via telecommunication network, to distribute or send it in any form, including the personal redirection (e-mail).

Downloads

Downloads

Staff only: View the document

^