Household financial vulnerability: an empirical analysis

Luisa Anderloni (), Emanuele Bacchiocchi and Daniela Vandone ()

Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano

Abstract: Using survey data, we investigate household financial distress. Specifically, we propose an indicator of financial vulnerability to jointly analyse different features of household financial distress, analysing its socio-demographic and economic determinants. 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 symptoms of financial vulnerability, such as problems in getting to the end of the month or an inability to face unexpected expenses. As regards the determinants of the financial vulnerability index, three findings 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, a higher level of education helps to reduce financial

Keywords: Financial Vulnerability Index; Household debt; Consumer Credit; Survey Data; Principal Component Analysis (search for similar items in EconPapers)
JEL-codes: C21 D14 D91 G21 (search for similar items in EconPapers)
Date: 2011-01-29, Revised 2011-11-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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