Measuring Households' Financial Fragilities: An analysis at the intersection of income, financial wealth, and debt†

Abstract

We provide an analysis of the financial fragilities of Italian households in the 2000–2020 period, using data from the Survey on Household Income and Wealth. We comment on the recent trends of financial ill‐being, using different poverty measures, and we provide a descriptive analysis of the fragile households' characteristics. Then, we model persistence in the dynamics of the poverty statuses using different specifications of the dynamic random‐effects probit model to account for observed and latent individual heterogeneity and endogeneity of the initial conditions. A strong state dependence is found in all the considered poverty statuses, with financial and liquidity poverty being the most persistent.