Debt and Depression: Evidence on Causal Links and Social Stigma Effects

33 Pages Posted: 5 Sep 2011

See all articles by John Gathergood

John Gathergood

University of Nottingham - School of Economics

Date Written: September 5, 2011

Abstract

Using individual-level panel data, this paper examines the relationship between problem debt and psychological health. Individuals exhibiting problems repaying their debt obligations also exhibit much worse psychological health, by either subjective or objective measures. However, selection into problem debt on the basis of poor psychological health accounts for much of this difference. The causality between problem debt and psychological health may be two-way. Local house price movements exogenous to individual households are used to establish the causality from problem mortgage debt to psychological health. In addition, the social stigma effects of problem debt are investigated using local bankruptcy and repossession rates as indicators of the local prevalence of problem debt in a reference group population. Results indicate there are sizeable causal links between problem debt and psychological health.

Keywords: debt, over-indebtedness, depression, reference group effects

JEL Classification: I10, D14

Suggested Citation

Gathergood, John, Debt and Depression: Evidence on Causal Links and Social Stigma Effects (September 5, 2011). Available at SSRN: https://ssrn.com/abstract=1922625 or http://dx.doi.org/10.2139/ssrn.1922625

John Gathergood (Contact Author)

University of Nottingham - School of Economics ( email )

Sir Clive Granger Building
University Park
Nottingham, NG7 2RD
United Kingdom

HOME PAGE: http://https://sites.google.com/site/gathergoodjohn/

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