Disability and Low Income Persistence in Italian Households

Purpose – The purpose of this paper is to investigate the determinants of the probability of low income for households with disabled members in Italy, over the period 2004-2007, with special focus on the role of persistence. Design/methodology/approach – Households with disabled members are compared with those without disabled members, and those with disabled members temporary limited. Alternative definitions of disability are considered. The probability of low income is estimated adopting dynamic probit models accounting for unobserved heterogeneity, state dependence and endogenous initial conditions. Findings – Evidence is found of significant true state dependence for households with disabled members. However, true state dependence does not significantly differ from that of other households. The probability of low income for households with disabled members is also determined by some structural variables, such as employment of disabled individuals, living in the South, household's partner employment and household size. Practical implications – In the short run, money transfer is effective to lift households with disabled members from low income and to prevent the risk of low income in the future. Structural policies are possibly relevant in reducing the long-term risk of low income. These include interventions to favour employment of disabled members and development of caring services for disabled members to free family members for outside work. Originality/value – Not much is known about how disability affects the conditions of households with disabled members. The paper contributes to this literature with a novel analysis of low income persistence, providing some policy suggestions.