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The Existence and Persistence of Household Financial Hardship

Author

Listed:
  • Sarah Brown

    (Department of Economics, The University of Sheffield)

  • Pulak Ghosh

    (Department of Quantitative Methods and Information Systems, Indian Institute of Management, Bangalore, India)

  • Karl Taylor

    (Department of Economics, The University of Sheffield)

Abstract

We investigate the existence and persistence of financial hardship at the household level using data from the British Household Panel Survey. Our modelling strategy makes three important contributions to the existing literature on household finances. Firstly, we model nine different types of household financial problems within a joint framework, allowing for correlation in the random effects across the nine equations. Secondly, we develop a dynamic framework in order to model the persistence of financial problems over time by extending our multi-equation framework to allow the presence or otherwise of different types of financial problems in the previous time period to influence the probability that the household currently experiences such problems. Our third contribution relates to the possibility that experiencing financial problems may be correlated with sample attrition. We model missing observations in the panel in order to allow for such attrition. Our findings reveal interesting variations in the determinants of experiencing different types of financial problems including demographic and regional differences. Our findings also highlight persistence in experiencing financial problems over time as well as the role that saving on a regular basis in previous time periods can play in mitigating current financial problems.

Suggested Citation

  • Sarah Brown & Pulak Ghosh & Karl Taylor, 2012. "The Existence and Persistence of Household Financial Hardship," Working Papers 2012022, The University of Sheffield, Department of Economics.
  • Handle: RePEc:shf:wpaper:2012022
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    File URL: http://www.shef.ac.uk/economics/research/serps/articles/2012_022.html
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    References listed on IDEAS

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    Cited by:

    1. Xu, Yilan & Briley, Daniel A. & Brown, Jeffrey R. & Roberts, Brent W., 2017. "Genetic and environmental influences on household financial distress," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 404-424.
    2. Lucchetti, Riccardo & Pigini, Claudia, 2017. "DPB: Dynamic Panel Binary Data Models in gretl," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 79(i08).
    3. Sarah Brown & Pulak Ghosh & Bhuvanesh Pareek & Karl Taylor, 2017. "Financial Hardship and Saving Behaviour: Bayesian Analysis of British Panel Data," Working Papers 2017011, The University of Sheffield, Department of Economics.
    4. Francesco Bartolucci & Valentina Nigro & Claudia Pigini, 2018. "Testing for state dependence in binary panel data with individual covariates by a modified quadratic exponential model," Econometric Reviews, Taylor & Francis Journals, vol. 37(1), pages 61-88, January.
    5. Francesco Bartolucci & Claudia Pigini, 2017. "Granger causality in dynamic binary short panel data models," Working Papers 421, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

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    More about this item

    Keywords

    financial problems; multivariate dynamic Logit model; sample attrition;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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