Can Debt Affect Your Health? Cross Country Evidence on the Debt-Health Nexus

29 Pages Posted: 26 Apr 2014

See all articles by Maya Clayton

Maya Clayton

University of St. Andrews - School of Management

José Manuel Liñares-Zegarra

University of Essex - Essex Business School

John O. S. Wilson

University of St. Andrews

Date Written: April 24, 2014

Abstract

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

Clayton, Maya and Linares-Zegarra, Jose Manuel and Wilson, John O. S., Can Debt Affect Your Health? Cross Country Evidence on the Debt-Health Nexus (April 24, 2014). Available at SSRN: https://ssrn.com/abstract=2429025 or http://dx.doi.org/10.2139/ssrn.2429025

Maya Clayton

University of St. Andrews - School of Management ( email )

The Gateway
North Haugh
St. Andrews, Fife, Scotland KY16 9SS
United Kingdom

Jose Manuel Linares-Zegarra

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

HOME PAGE: http://www.essex.ac.uk/ebs/staff/profile.aspx?ID=4474

John O. S. Wilson (Contact Author)

University of St. Andrews ( email )

North St
Saint Andrews, Fife KY16 9AJ
United Kingdom

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