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Debt and Health

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  • Pamela Lenton

    ()

  • Paul Mosley

    ()
    (Department of Economics, The University of Sheffield)

Abstract

Debt problems in the UK have recently become much more severe, especially for the lowest income groups, and we examine here their impact on health, using data from the national Families´ and Children´s Survey (FACS). We model the relationship between debt and health as a simultaneous two-way interaction, and find that debt levels have a negative effect on both physical and psychological health. We find that debt repayment structure, defined as the percentage of debt borrowed in high-interest categories, has an impact on health independent of the level of debt. The interaction between debt and health may aggravate the poverty trap, by pushing heavily-indebted low-income people into ill-health, which then makes it difficult for them to acquire or hold on to the steady jobs needed to ease their debt problems. We also find that worry has a negative influence on debt management capacity, and thence on health, which makes it more difficult for those caught in a debt trap to escape from it. Membership of credit unions tends to reduce worry, however, and thereby may facilitate escape from the debt-ill health spiral.

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Bibliographic Info

Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2008004.

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Length: 22 pages
Date of creation: Apr 2008
Date of revision: Apr 2008
Handle: RePEc:shf:wpaper:2008004

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Keywords: Debt; Health; Random effects ordered probit models;

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References

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  1. Bridges, Sarah & Disney, Richard, 2010. "Debt and depression," Journal of Health Economics, Elsevier, vol. 29(3), pages 388-403, May.
  2. Bound, John & Schoenbaum, Michael & Stinebrickner, Todd R. & Waidmann, Timothy, 1999. "The dynamic effects of health on the labor force transitions of older workers," Labour Economics, Elsevier, vol. 6(2), pages 179-202, June.
  3. Sarah Bridges & Richard Disney, 2004. "Use of credit and arrears on debt among low-income families in the United Kingdom," Fiscal Studies, Institute for Fiscal Studies, vol. 25(1), pages 1-25, March.
  4. Amemiya, Takeshi, 1978. "The Estimation of a Simultaneous Equation Generalized Probit Model," Econometrica, Econometric Society, vol. 46(5), pages 1193-1205, September.
  5. John Bound, 1991. "Self-Reported Versus Objective Measures of Health in Retirement Models," Journal of Human Resources, University of Wisconsin Press, vol. 26(1), pages 106-138.
  6. Brown, Sarah & Taylor, Karl & Wheatley Price, Stephen, 2005. "Debt and distress: Evaluating the psychological cost of credit," Journal of Economic Psychology, Elsevier, vol. 26(5), pages 642-663, October.
  7. Bartel, Ann & Taubman, Paul, 1986. "Some Economic and Demographic Consequences of Mental Illness," Journal of Labor Economics, University of Chicago Press, vol. 4(2), pages 243-56, April.
  8. Richard Disney & Sarah Bridges & John Gathergood, 2006. "Housing Wealth and Household Indebtedness: Is there a Household 'Financial Accelerator'?," Working Papers 2006/12, Czech National Bank, Research Department.
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Cited by:
  1. Matthias Keese, 2010. "Who Feels Constrained by High Debt Burdens? – Subjective vs. Objective Measures of Household Indebtedness," Ruhr Economic Papers 0169, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. John Gathergood, . "Debt and Depression: Evidence on Casual Links and Social Stigma Effects," Discussion Papers 11/10, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).

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