Is Financial Fragility a Matter of Illiquidity? An Appraisal for Italian Households

Brunetti, Marianna; Giarda, Elena; Torricelli, Costanza

doi:10.2139/ssrn.2112035

Cited by 25 publications

(37 citation statements)

References 24 publications

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“…The same indicator is used in Brunetti et al . () to analyse whether excessive portfolio illiquidity due to homeownership is connected to financial fragility of Italian households . Moreover, we consider separately the presence of a mortgage using a dummy (and for this reason we do not consider net wealth).…”

Section: Econometric Specifications and Resultsmentioning

confidence: 99%

Does Homeownership Partly Explain Low Participation in Supplementary Pension Schemes?

2016

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To investigate a possible trade-off between homeownership and individual participation in a supplementary pension scheme, we use nine waves of the Bank of Italy's Survey on Household income and Wealth (1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012). Italy lends itself to this type of investigation because the Italian public pension system was heavily reformed in the period, providing in principle incentives for participation, and the homeownership rate is very high. The impact of homeownership is captured in two ways: by a dummy for being homeowner and by an index capturing household portfolio illiquidity due to housing. Our results show that, after controlling for a vast array of socio-economic characteristics and allowing for unobserved individual heterogeneity, both measures of homeownership are negatively associated with participation in supplementary pension schemes. Moreover such an effect persists both in boom and bust phases of the housing market and does not disappear even after tax incentives and a strong default option introduced by the 2007 reform.(J.E.L.: D91, H55).

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Section: Econometric Specifications and Resultsmentioning

confidence: 99%

Does Homeownership Partly Explain Low Participation in Supplementary Pension Schemes?

2016

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“…However, Brunetti, Giarda & Torricelli (2012) reported that males were more likely to experience financial fragility. However, Del Rio and Young (2005) and Loke (2016) found no gender difference in self-assessed financial burdens and living beyond ones means, respectively.…”

Section: Discussionmentioning

confidence: 99%

“…should not be confused with financial literacy, which had a recognisable value in managing debt (Nyaruwata, 2009;Brunetti et al, 2012;Loke, 2016). Lack of financial education is a key determinant of over-indebtedness (Disney & Gathergood, 2011;Cavalletti, Lagazio, Vandone & Lagomarsino, 2012).…”

Section: Discussionmentioning

confidence: 99%

The threshold effects of household indebtedness on multidimensional poverty

Ntsalaze

Ikhide

2017

IJSE

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DeclarationBy submitting this dissertation electronically, I declare that the entirety of the work contained therein is my own, original work, that I am the sole author thereof (save to the extent explicitly otherwise stated), that reproduction and publication thereof by Stellenbosch University will not infringe any third party rights and that I have not previously in its entirety or in part submitted it for obtaining any qualification.This dissertation includes two published and one accepted but not yet published original papers in peer-reviewed international journals. The fourth paper representing chapter eight is ready for submission for peer review. The development and writing of the papers (published and unpublished) were the principal responsibility of myself and, for each of the cases where this is not the case, a declaration is included in the dissertation indicating the nature and extent of the contributions of co-authors. AbstractGlobal household indebtedness has reached unprecedented levels over the past few decades.The household sector has had to cope with significant losses in income and wealth as well as the burden of debt service since the beginning of the financial crisis. Research focus on this phenomenon, together with its social implications, has grown. This study uses the National Income Dynamics Study (NIDS) data to empirically investigate the effects of household debt on multidimensional poverty. This was achieved through four independent research papers meant to address different angles of the subject. Chapter 5 provides a snapshot of the prevalence of over-indebtedness, using various international indicators and the National Credit Regulator (NCR) indicator, and describes which households are over-indebted. A total of eight percent of South African households are overindebted, and 61.4 percent of those households are found in the lowest income category (R0 -R2 000), spending more than 45 percent of their household income on debt repayments, which is beyond levels that are considered sustainable. The alarming revelation is that, according to the unsecured debt indicator, 15.2 percent of households are over-indebted, while 11 percent of households are driven below the relative income poverty line after making debt repayments. Stellenbosch University https://scholar.sun.ac.za 3The racial distribution indicates that households headed by Africans are overrepresented (79%).Most over-indebted households are found amongst those who own their places of residence (78.6%), do not receive government grants (71.7%), are male (53.8%), and have an unemployed household head (53.5%).Chapter 6 examines the presence of thresholds in the debt-poverty nexus at micro level, i.e. the tipping point above which debt is associated with more multidimensional poverty. By applying the Generalised Additive Model (GAM) using regression splines, the study finds the existence of critical tipping points between household debt service-to-income ratio and multidimensional poverty along with other explanatory variables (age...

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“…However, recent work has been aided by the arrival of more detailed data on household balance sheets ), Lusardi (2011), Jappelli et al (2013, Ampudia et al (2016), Brunetti et al (2016)) and aims to gauge borrowing capacity and resilience to sudden, unforeseen expenditures. Specifically, this work primarily focuses on measuring the ability of households to remain current on incurred debts, as well as the question of how much borrowing the household could feasibly engage in, within a short term period, e.g., 30 daysespecially to cover an unforeseen "expense" (as opposed to a change in income, say).…”

Section: Related Workmentioning

confidence: 99%

The Persistence of Financial Distress

Athreya¹,

Mustre-del-Rio²,

Sánchez³

2017

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Using proprietary panel data, we show that many US consumers experience financial dis-tress (35% when distress is defined by severe delinquency, e.g.) at some point in their lives. However, most distress events are concentrated in a much smaller proportion of consumers in persistent trouble. While only 10% of consumers are distressed for more than a quarter of their lives, fewer than 10% of borrowers account for half of all distress events. These facts can be largely accounted for in a straightforward extension of a workhorse model of defaultable debt with informal default that accommodates a simple form of heterogeneity in time preference, but not otherwise.JEL classification: D60, E21, E44

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Is Financial Fragility a Matter of Illiquidity? An Appraisal for Italian Households

Cited by 25 publications

References 24 publications

Does Homeownership Partly Explain Low Participation in Supplementary Pension Schemes?

Does Homeownership Partly Explain Low Participation in Supplementary Pension Schemes?

The threshold effects of household indebtedness on multidimensional poverty

The Persistence of Financial Distress

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