On Households’ Difficulties in Covering Expected Expenses: A Comparison Across EU Countries

Abstract Household financial vulnerability has become a central concern in European economies, particularly in the aftermath of recent economic shocks. This paper investigates the ability of households to cover expected expenditure using disposable income, by employing a continuous measure of financial vulnerability that overcomes the limitations of standard dichotomous indicators. Using data from the Household Budget Survey (HBS) provided by Eurostat, we model the marginal distributions of income and expenditure as functions of socio-demographic characteristics, and capture their dependence structure through a copula-based approach. This framework allows us to estimate the probability that household expenditure exceeds available resources and to evaluate how this risk varies across population groups and countries. Our findings highlight three main results. First, employment status and education are the primary determinants of financial vulnerability across all countries. Second, the protective role of education is strongly context-dependent and may be limited in weaker labour market environments. Third, a clear divide emerges between Eastern and Western European countries, with structurally higher vulnerability in the former even for relatively advantaged household profiles. By jointly modelling income and expenditure, the proposed approach provides a more comprehensive and comparable measure of financial vulnerability across countries, offering relevant insights for the design of targeted economic and social policies.