Obesity and Credit Risk

Abstract:     
Obesity provides a potentially informative signal about individuals' choices and preferences. Using NLSY survey data, we estimate that the loan delinquency rate among the obese is 20 percent higher than among the non-obese after controlling for numerous observable, prohibited, and - to lenders - unobservable credit risk factors. The economic significance of obesity for delinquencies is comparable to that of job displacements. Obesity is particularly informative about future delinquencies among those with low credit risk. In terms of channels, we find that the obesity effect is at least partially mediated through poor health, but is not attributable to individuals' time preferences.

Number of Pages in PDF File: 73

Keywords: obesity, default, delinquency, bankruptcy, financial distress, personal finance, household finance, consumer credit

JEL Classification: D12, D91, G00, G19, I19

working papers series