Education of the Head and Financial Vulnerability of Households: Evidence from a Household’s Survey Data in Pakistan

This paper is aimed at to ascertain the relationship between education of head of the households and their financial vulnerability using data comprising of 17,031 households obtained from Household Integrated Economic Survey 2015–2016 in Pakistan. We have compiled three measures of financial vulnerability at household level i.e. financial margins excluding and including the rental payments and Financial Vulnerability Index (FVI). According to the results, proportion of financially vulnerable households in both measures of financial margin declines along with increase in level of education of the head of households and stands at 66% and 77% for no formal education of the head, 56% and 70% for primary, 42% and 61% for secondary, 27% and 44% for higher secondary, 14% and 32% for graduate and 13% and 24% for post graduate levels of education. FVI results indicate that out of 2504 highly vulnerable households i.e. falling in the bottom 10% of the distribution, 63.8% were those with no formal education of their heads followed by 19.3% with primary, 14.3% with secondary and 1.9% with higher secondary level of education. Further, various levels of education and individual characteristics such as marital status, gender, region, province and employment status of the heads, have been emerged as significant determinants of financial vulnerability in all three estimated measures along with household’s income, consumption, savings and rental payments. Findings of the study calls for greater human capital investment both by households and the government of Pakistan in order to stabilize the financial conditions of the households at micro level, which in turn can promote stability and resilience at macro level.