Leverage, Default, and Mortality: Evidence from Cancer Diagnoses

Abstract

This paper tests whether housing wealth mitigates the effects of health shocks on financial stress and mortality. We link cancer records to mortgage, bankruptcy, foreclosure, and credit report data. We find that cancer diagnoses are financially destabilizing even for households with health insurance, but the effect is driven by households without home equity. Households with equity extract it (by refinancing a mortgage or taking out a second). They are also more likely to accept recommended therapies and have higher post-diagnosis survival rates. Our findings show that housing wealth plays an important role in understanding how individuals buffer idiosyncratic shocks.

Keywords: Cancer, Health Shocks, Household Financial Fragility, Foreclosure, Medical Bankruptcy, Adverse Shocks, Leverage, Debt Overhand, Household Finance

JEL Classification: D14, D12, G33, I13, K35, R20