Household Financial Vulnerability: An Empirical Analysis

38 Pages Posted: 16 Nov 2011

See all articles by Daniela Vandone

Daniela Vandone

University of Milan

Emanuele Bacchiocchi

Università degli Studi di Milano

Luisa Anderloni

University of Milan - DEAS

Date Written: January 1, 2011

Abstract

Using survey data, we investigate household financial distress. Specifically, we propose an indicator of financial vulnerability to jointly analyze different features of household financial distress, analyzing 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 behavior 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 fragility.

Keywords: financial vulnerability index, household debt, consumer credit, survey data, principal component analysis

JEL Classification: C21, D14, D91, G21

Suggested Citation

Vandone, Daniela and Bacchiocchi, Emanuele and Anderloni, Luisa, Household Financial Vulnerability: An Empirical Analysis (January 1, 2011). Available at SSRN: https://ssrn.com/abstract=1959801 or http://dx.doi.org/10.2139/ssrn.1959801

Daniela Vandone (Contact Author)

University of Milan ( email )

Via Festa del Perdono, 7
Milan, 20122
Italy

Emanuele Bacchiocchi

Università degli Studi di Milano ( email )

Milan, 20122
Italy

Luisa Anderloni

University of Milan - DEAS ( email )

Via Conservatorio, 7
Milan, 20122
Italy
+390250321546 (Phone)
+390250321505 (Fax)

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