The effect of demographics on payment behavior : panel data with sample selection

Today's consumer has access to more payment instruments than consumers of just a few years ago, as newer electronic payments are penetrating an established payments market, while older methods, such as cash and checks, remain important payment alternatives. As the number of available payment methods increases, so does the need to understand why consumers adopt certain payment instruments, how consumers choose to pay for purchases, which consumers make certain payments, and who is most affected by changes in the payment system. Connolly and Stavins (2015) showed that income and demographic attributes are correlated with payment behavior, based on the 2009-2013 data from the Survey of Consumer Payment Choice. In this paper, the author applies a panel data model with sample selection based on Wooldridge (1995) to test whether socio-demographic attributes affect payment behavior even when all the other observable characteristics are controlled for.