Housing Wealth, Health and Deaths of Despair

Abstract

The debate on the impact of economic conditions on health has been recently amplified by the drug crisis in the US attributed by some to “deaths of despair.” There is little understanding of the magnitude of the impact of economic conditions on health and the reasons why it varies across socioeconomic groups and geographical areas. We show that housing is an important unexplored driver that explains these differences. We exploit the fact that households that overvalue (undervalue) their houses experience an unexpected negative (positive) shock in their housing wealth when they sell their houses. We find that a one standard deviation positive shock in housing wealth increases the probability of an improvement in self-reported health by 1.13 percentage points and decreases the drug-related mortality rate by 0.27. We exploit the geographical variation in unexpected housing wealth shocks and find that households who live in MSAs with more inelastic housing supply experience larger changes in health outcomes.

Keywords: Health, Wealth, Housing, Misestimation, Households

JEL Classification: I10, R20, R30, R31, D10