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Determinants of the conditional probability that a household has informal loans given liquidity constraints regarding access to credit banking channels

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  • Zanin, Luca

Abstract

We use a semiparametric bivariate probit model to explore the determinants of the conditional probability that a household has informal loans given objective or subjective liquidity constraints regarding access to credit through banking channels. In our empirical study, we use Italian microdata on household income and wealth covering the 1995–2014 period. Our results emphasize that the most important trigger factors influencing the conditional probability of interest are debts in the form of both mortgage(s) and loan(s) and the unemployment status of the household head. Other trigger factors include a young age of the household head, residence in a large municipality, no home ownership (paying rent or free use), an equivalent income lower than 10,000 Euro, and a ratio of liquid assets to net annual income very close to zero. Understanding the factors associated with a household’s probability of taking out informal loans is important to gain knowledge about a phenomenon that is not tracked by official statistics. This knowledge is also useful to practitioners and policy-makers interested in providing new tailored financial services or solutions for reducing poverty risk.

Suggested Citation

  • Zanin, Luca, 2017. "Determinants of the conditional probability that a household has informal loans given liquidity constraints regarding access to credit banking channels," Journal of Behavioral and Experimental Finance, Elsevier, vol. 13(C), pages 16-24.
    • Handle: RePEc:eee:beexfi:v:13:y:2017:i:c:p:16-24
    DOI: 10.1016/j.jbef.2017.02.002
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    Citations

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    Cited by:

    1. Michele Benvenuti & Luca Casolaro & Emanuele Ciani, 2022. "Informal loans, liquidity constraints and local credit supply: evidence from Italy," Review of Economics of the Household, Springer, vol. 20(4), pages 1429-1461, December.
    2. Zanin, Luca, 2018. "Private monetary transfers between households: Who is helped and by whom?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 17(C), pages 76-82.
    3. Francisco Fernández López, 2017. "Impacto de la informalidad laboral sobre el acceso a crédito formal," Coyuntura Económica, Fedesarrollo, vol. 47(1 y 2), pages 169-204, December.
    4. Zanin, Luca, 2023. "A flexible estimation of sectoral portfolio exposure to climate transition risks in the European stock market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).
    5. Chiara Mussida & Luca Zanin, 2020. "Determinants of the Choice of Job Search Channels by the Unemployed Using a Multivariate Probit Model," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 152(1), pages 369-420, November.
    6. David Aristei & Cristiano Perugini, 2022. "Credit and income mobility in Russia," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(3), pages 639-669, September.
    7. Heo, Wookjae & Lee, Jae Min & Park, Narang & Grable, John E., 2020. "Using Artificial Neural Network techniques to improve the description and prediction of household financial ratios," Journal of Behavioral and Experimental Finance, Elsevier, vol. 25(C).
    8. Bertsch, Christoph & Hull, Isaiah & Qi, Yingjie & Zhang, Xin, 2020. "Bank misconduct and online lending," Journal of Banking & Finance, Elsevier, vol. 116(C).

    More about this item

    Keywords

    Conditional probability; Liquidity constraints; Informal loans; Semiparametric bivariate probit;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy

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