Measuring Economic Uncertainty: Longitudinal Evidence Using a Latent Transition Model

Economic uncertainty has become an increasing important factor in explaining socio-economic household behaviour, especially for its implications in household choices and demographic dynamics. Accordingly, an operational definition and a measure of economic uncertainty are needed. To this aim, the main purpose of this contribution is to measure economic uncertainty of Italian families by using the 2008-2011 and 2012-2015 longitudinal Italian SILC (Statistics on Income and Living Conditions) data in a latent transition analysis (LTA) approach. LTA is applied, in order: i) to classify Italian households into homogenous classes characterized by different levels of economic uncertainty, and ii) to assess whether changes in latent class membership occurred in the time span selected.