Household Financial Vulnerability: An Empirical Analysis

Daniela Vandone, Emanuele Bacchiocchi, Luisa Anderloni
2011 Social Science Research Network  
Using survey data, we investigate household financial distress. Specifically, we propose an indicator of financial vulnerability to analyse jointly different features of household financial distress. We also analyse the socio-demographic and economic determinants of financial vulnerability. A total number of 3,102 Italian households make up the sample. The empirical analysis highlights that for the median level of the financial vulnerability index households already exhibit some important
more » ... ms of financial vulnerability, such as problems getting to the end of the month or inability to meet unexpected expense. Concerning the determinants of the financial vulnerability index, there are three evidences that need to be pointed out. First, the level of debt servicing is positively related to financial vulnerability and the effect is stronger for households holding unsecured debt, i.e. consumer credit. Second, financial vulnerability also increases for impulsive individuals, who may adopt impatient, short-sighted behaviour patterns which make it difficult for them to be fully aware of the consequences of their financial and spending decisions. Third, increased education helps to reduce financial fragility.
doi:10.2139/ssrn.1959801 fatcat:4y2h3j4tdnbw7gqungcm5loeau