The dimension of over-indebtedness in Italy and the characteristics of the over-indebted households

Our chapter provides an overview of over-indebtedness in Italy from an economic perspective. In Section 2 we focus on the definition and measurement of over-indebtedness and we highlight the need to account for different variables in order to capture the multidimensional nature of the phenomenon. In Section 3 we depict the overall economic and financial situation of Italian households as it is reported by the Bank of Italy and the Italian Statistic Institute. In Section 4 we provide a literature review of empirical papers focusing on nature and causes of over-indebtedness. In Section 5 we present our analysis based on a sample of 1,933 Italian households and aimed at identifying the characteristics of households over-indebted or at risk of over-indebtedness. Specifically, in Section 5.1 we describe the sample, in Section 5.2 we build a Financial Vulnerability Index that adds different profiles of financial distress, in Section 5.3 we use a linear regression model to analyse explanatory variables of financial vulnerability, in Section 5.4 we use a Principal Component Analysis to group households according to their financial vulnerability characteristics.