Are income poverty and perceptions of financial difficulties dynamically interrelated?

Sara Ayllón and Alessio Fusco

No 2016-05, LISER Working Paper Series from Luxembourg Institute of Socio-Economic Research (LISER)

Abstract: An individual's economic ill fare can be assessed both objectively, looking at one's income with reference to a poverty line, or subjectively on the basis of the individual's perceived experience of financial difficulties. Although these are distinct perspectives, income poverty and perceptions of financial difficulties are likely to be interrelated: low income (especially if it persists) is likely to negatively affect perceptions of financial difficulties and, as recently suggested by the behavioral economics literature, (past) subjective sentiment may in return influence individual's income generating ability and poverty status. The aim of this paper is to determine the extent of these dynamic cross-effects between both processes. Using Luxembourg survey data, our main result highlights the existence of a feedback effect from past perceived financial difficulties on current income poverty suggesting that subjective perceptions can have objective effects on an individual's behaviour and outcomes.

Keywords: aspirations; behavioural economics; dynamic joint models; feedback effects; income poverty; perceived financial difficulties; state dependence (search for similar items in EconPapers)
JEL-codes: D31 D60 I32 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2016-06
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.liser.lu/publi_viewer.cfm?tmp=3969 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: Are income poverty and perceptions of financial difficulties dynamically interrelated? (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:irs:cepswp:2016-05

Access Statistics for this paper

More papers in LISER Working Paper Series from Luxembourg Institute of Socio-Economic Research (LISER) 11, Porte des Sciences, L-4366 Esch-sur-Alzette, G.-D. Luxembourg. Contact information at EDIRC.
Bibliographic data for series maintained by Library and Documentation ( this e-mail address is bad, please contact ).