Introduction

Recent research on the evolution of the Italian saving rate has suggested that capital market imperfections are among the probable explanations for the high rate of saving in Italy. Reasonable as it is, the borrowing constraints hypothesis can only be accepted or rejected on empirical grounds. In the case of Italy, Jappelli and Pagano (1988), Guiso and Jappelli (1994) and Guiso, Jappelli and Terlizzese (1994) have attempted to evaluate the impact of capital market imperfections on households' saving decisions and have substantiated their claims by means of a number of empirical tests designed to assess the effect of credit market imperfections on the saving behavior of Italian households.

Their work relies crucially on exogenously given criteria to identify liquidity–constrained consumers. For example, in Jappelli and Pagano (1988), the sample selection rule (i.e. the arbitrary threshold above which liquidity constraints are supposed to operate) coincides with a propensity to save below 15 percent. Alternatively, they rely (along with Guiso and Jappelli, 1994) on direct information (available in the Bank of Italy Survey of Household Income and Wealth, SHIW) regarding consumers turned down (or expecting to be turned down) in the market for consumer credit. Finally, to assess the impact of mortgage market imperfections Guiso et al. (1994) assume that homeowners are not constrained in the mortgage market.