Investigating and modelling the perception of economic security in the survey of household income and wealth

The standard practice to predict economic behaviour has been to infer decision processes from the business cycle. Current decisions depend on the individual expectation of future variables including stock market returns, job loss, earning and social security benefit. Recently, several studies have looked at identifying how the effects of (subjective) perception affect the economic security of household well-being. After reviewing some preliminary concepts in this area, we implement a statistical model to analyse individual choices. We discuss properties and check their usefulness and consistency by means of data related to the Survey of Household Income and Wealth. An analysis of this model helps us understand individual uncertainty and how perception evolves over the life cycle conditioned by education and happiness. Some final remarks conclude the paper. © Springer-Verlag Italia 2012