Household financial vulnerability: an empirical analysis
AbstractUsing 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
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Bibliographic InfoPaper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 2011-02.
Date of creation: 29 Jan 2011
Date of revision: 03 Nov 2011
Financial Vulnerability Index; Household debt; Consumer Credit; Survey Data; Principal Component Analysis;
Find related papers by JEL classification:
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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- C. Giannetti & M. Madia & L. Moretti, 2013. "Job Insecurity and Financial Distress," Working Papers wp887, Dipartimento Scienze Economiche, Universita' di Bologna.
- Barbara Cavalletti & Corrado Lagazio & Daniela Vandone & Elena Lagomarsino, 2012. "The role of financial position on consumer indebted-ness. An empirical analysis in Italy," DEP - series of economic working papers 8/2012, University of Genoa, Research Doctorate in Public Economics.
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