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Health and Financial Fragility: Evidence from Car Crashes and Consumer Bankruptcy

54 Pages Posted: 13 Nov 2013  

Edward R. Morrison

Columbia Law School

Arpit Gupta

NYU Stern School of Business

Lenora Olson

University of Utah - School of Medicine

Lawrence Cook

University of Utah - School of Medicine

Heather Keenan

University of Utah - School of Medicine

Date Written: October 17, 2013

Abstract

This paper assesses the importance of adverse health shocks as triggers of bankruptcy filings. We view car crashes as a proxy for health shocks and draw on a large sample of police crash reports linked to hospital admission records and bankruptcy case files. We report two findings: (i) there is a strong positive correlation between an individual's pre-shock financial condition and his or her likelihood of suffering a health shock, an example of behavioral consistency; and (ii) after accounting for this simultaneity, we are unable to identify a causal effect of health shocks on bankruptcy filing rates. These findings emphasize the importance of risk heterogeneity in determining financial fragility, raise questions about prior studies of "medical bankruptcy," and point to important challenges in identifying the triggers of consumer bankruptcy.

Keywords: Bankruptcy, Medical Bankruptcy, Health Shocks, Adverse Shocks

JEL Classification: K35, D14, D12, G33

Suggested Citation

Morrison, Edward R. and Gupta, Arpit and Olson, Lenora and Cook, Lawrence and Keenan, Heather, Health and Financial Fragility: Evidence from Car Crashes and Consumer Bankruptcy (October 17, 2013). University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 655; Columbia Business School Research Paper No. 13-81. Available at SSRN: https://ssrn.com/abstract=2353328 or http://dx.doi.org/10.2139/ssrn.2353328

Edward R. Morrison (Contact Author)

Columbia Law School ( email )

435 West 116th Street
New York, NY 10025
United States

Arpit Gupta

NYU Stern School of Business ( email )

New York, NY
United States

HOME PAGE: http://arpitgupta.info

Lenora Olson

University of Utah - School of Medicine ( email )

Salt Lake City, UT
United States

Lawrence Cook

University of Utah - School of Medicine ( email )

Salt Lake City, UT
United States

Heather Keenan

University of Utah - School of Medicine ( email )

30 N 1900 E
Salt Lake City, UT 84132
United States

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