Broke, Ill, and Obese: The Effect of Household Debt on Health

30 Pages Posted: 9 Jan 2011

See all articles by Matthias Keese

Matthias Keese

Ruhr Graduate School in Economics

Hendrik Schmitz

University of Duisburg-Essen - Department of Economics and Business Administration

Multiple version iconThere are 2 versions of this paper

Date Written: January 5, 2011

Abstract

We analyze the effect of household indebtedness on different health outcomes using data from the German Socio-Economic Panel from 1999–2009. To establish a causal effect, we rely on (a) fixed-effects methods, (b) a subsample of constantly employed individuals, and (c) lagged debt variables to rule out problems of reverse causality. We apply different measures of household indebtedness, such as the percentage shares of household income spent on consumer credit and home loan repayments (which indicate the severity of household indebtedness) and a binary variable of relative overindebtedness (which indicates a precarious debt situation). We find all debt measures to be strongly correlated with health satisfaction, mental health, and obesity. Controlling for unobserved heterogeneity and reversed causality we find evidence that household debt also causally deteriorates physical and mental health. However, there is no causal effect on being obese.

Keywords: Debt, health satisfaction, mental health, obesity, fixed-effects

JEL Classification: D12, D14, I12

Suggested Citation

Keese, Matthias and Schmitz, Hendrik, Broke, Ill, and Obese: The Effect of Household Debt on Health (January 5, 2011). Ruhr Economic Paper No. 234. Available at SSRN: https://ssrn.com/abstract=1735420 or http://dx.doi.org/10.2139/ssrn.1735420

Matthias Keese

Ruhr Graduate School in Economics ( email )

Hohenzollernstr. 1-3
Essen, NRW 45128
Germany

Hendrik Schmitz (Contact Author)

University of Duisburg-Essen - Department of Economics and Business Administration ( email )

Universitätsstr. 9
Essen, 45141
Germany

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