An Invisible Oncologist: Health Implications of Financing Frictions

Abstract

We investigate how financing frictions affect longevity by focusing on US cancer patients. We build a life-cycle model of portfolio choice in which households face a cancer risk, whereas treatment is costly and limited by the financing capacity tied to their home values. An alleviation of financing frictions enlarges such capacity but incentivizes a portfolio shift from liquid assets to home equity. Consequently, if hit by cancer shocks, households' longevity can be compromised as housing assets cannot be easily liquidated. Exploiting variations in bank branching deregulation across states, we provide novel empirical evidence consistent with the model implications.

Keywords: Financing frictions, longevity, housing price, healthcare

JEL Classification: D14, G51, I15, I31