can be written as follows:
exp(α1 + Xiβ1)
P(Yi > 1) = g(Xiβ1) = (j + [gχp(αι + χiβι)] )
P(Yi > 2) = g(Xfft) = ( eχp(02 + Xiβ2) )
1 + [exp(α2 + Xiβ2)]
exp(α3 + Xiβ3)
P(Yi > 3) = g(Xiβ3) = ^1 + [κχp(α3 + χiβ3)] )
Where: Yi is the categorical dependent variable, “Degree of Struggle to Keep Up’, Xi is a
vector of independent variables, β is a coefficient to be estimated andα is a constant.
The results are presented in Table 8, where estimates (rather than marginal effects)
and standard errors are reported. Column 1 contrasts category 1 with categories 2, 3 and
4 (where category 1 is set to zero and categories 2, 3 and 4 are set to 1); the second col-
umn contrasts categories 1 and 2 with categories 3 and 4; and the third column contrasts
categories 1, 2 and 3 with category 4. As discussed in Williams(2006), positive coefficients
indicate that higher values on the explanatory variable make it more likely that the respon-
dent will be in a higher category of Y than the current one. Negative coefficients indicate
that higher values on the explanatory variable increase the likelihood of being in the current
or a lower category.
The results show that while the effect and statistical significance of independent vari-
ables differ across the various outcomes of “Degree of Struggle to Keep Up”, the behavioural
and time preference variables are important and statistically significant across all outcomes.
In particular, the negative coefficients on the variables capturing impulsiveness and impa-
tience imply that respondents with these traits are more likely to get into financial difficul-
ties than respondents who are not impulsive or impatient. On the other hand, respondents
who are organised are less likely to get into financial difficulties.
Finally, I examine the effect of financial literacy in the UK sample on the various
distress outcomes. The results (which are not reported in the table) show that, relative
to respondents with no difficulties in keeping up with their bills and credit commitments,
financial literacy reduces the chances of experiencing financial troubles.
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