Evidence from several countries is that any household experiencing poverty today is much more likely to experience it again, which may be due to both true state dependence (TSD) and unobserved heterogeneity (UH). We deal with UH by specifying two sources of it: (i) the household’s ability to obtain income in a specific, initial time period, and (ii) the way in which this ability evolves from that time period onwards. We test for TSD using the
panel component of the Italian Survey on Household Income and Wealth. After ascertaining the ignorability of the process that generates the massive attrition plaguing the
panel, we do not find any sign of TSD. |
