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The existence and persistence of household financial hardship

Brown, S., Ghosh, P. and Taylor, K. (2012) The existence and persistence of household financial hardship. Working Paper. Department of Economics, University of Sheffield

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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.

Item Type: Monograph (Working Paper)
Copyright, Publisher and Additional Information: The Sheffield Economics Research Paper (SERP) series offers a forum for the research output of the academic staff and research students of the Department of Economics, University of Sheffield. Papers are reviewed for quality and presentation by a departmental editor. However, the contents and opinions expressed remain the responsibility of the authors. All papers may be downloaded free on the understanding that the contents are preliminary and therefore permission from the author(s) should be sought before they are referenced.
Keywords: financial problems; multivariate dynamic Logit model; sample attrition;
Institution: The University of Sheffield
Academic Units: The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Economics (Sheffield) > Sheffield Economics Research Papers Series
Depositing User: Miss Anthea Tucker
Date Deposited: 01 Oct 2012 09:45
Last Modified: 05 Jun 2014 19:13
Published Version: http://www.shef.ac.uk/economics/research/serps/yea...
Status: Published
Publisher: Department of Economics, University of Sheffield
Identification Number: 2012022
URI: http://eprints.whiterose.ac.uk/id/eprint/74526

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