Exploring the Relationship Between Economic Resources and the Self-Assessed Measure of Economic Vulnerability
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This is the third chapter of Part IV, focusing on the analysis of the Self-Assessed Measure (economic strain: difficulties in making ends meet) of economic vulnerability and its distinctiveness from the Objective Measure (income poverty). Understanding the relationship between the Self-Assessed Measure and economic resources is particularly relevant with regard to the hypothesis that the subjective difficulties in making ends meet may capture differences in the ability to cope with low monthly income. Wealth consumption has previously been mentioned as one of the coping strategies that moderates the level of economic strain an individual experiences at a given level of income. The question is in what way monthly household income and household wealth interact in their effect on self-assessed economic vulnerability. In the following, we will estimate multiple models in order to test competing concepts for the relationship between the three variables. The models were performed using maximum likelihood estimation since all variables follow a normal distribution.