Can Debt Affect Your Health? Cross Country Evidence on the Debt-Health Nexus
29 Pages Posted: 26 Apr 2014
Date Written: April 24, 2014
We investigate the relationship between household debt and health outcomes for OECD countries over the period 1995 to 2012. Using a dataset of aggregated, standardized and objective measures of household debt and health outcomes, we estimate an instrumental variable (GMM) model in order to deal with endogeneity and reverse causality concerns between health and debt. We find that higher household debt is linked to poorer general health. The results are also significant in extreme cases where households are among the most financially distressed (over-indebted). We also find a link between debt maturity and health. Long-term household debt reduces life expectancy and increases premature mortality. The opposite holds for the relation between short and medium term debt and health. The results are robust after controlling for other socio-economic factors (including GDP per capita, government expenditure on health, percentage of rural population and alcohol consumption) that affect health.
Keywords: Debt, Endogeneity, Health, Generalized Method of Moments, Household debt, Indebtedness, OECD countries
JEL Classification: D12, D14, I12
Suggested Citation: Suggested Citation