Private Monetary Transfers Between Households: Who Is Helped and by Whom?
Journal of Behavioral and Experimental Finance, Volume 17, Pages 76-82, 2018
Posted: 1 May 2018
Date Written: April 15, 2018
We propose using a system of three equations with binary responses to explore the determinants of a household receiving a private monetary transfer from three different types of informal lenders in Italy. First, we observe that a semi-parametric specification of the system of equations is preferred to a fully parametric modelling approach. Second, we detect the existence of an error correlation structure that characterises the dependence of informal lenders after accounting for a number of observable covariates. Third, we find that the network of close family relationships (parents or adult children) represents the main source of an informal transfer, especially for households in debt to financial intermediaries or who are in arrears with payments and whose household head is unemployed or in poor health. Finally, we propose estimating the entity of monetary transfer in terms of expected value using a simulation that combines the joint response probabilities obtained from the system of equations with the empirical distribution of monetary transfers.
Keywords: Expected Value Informal Lenders; Loan or Monetary Gift; System of Three Equations With Binary Responses
JEL Classification: C14; D14; E26
Suggested Citation: Suggested Citation