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When Loss Strikes Twice: Severe Health Shocks and Financial Well-Being

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Listed:
  • Majlesi, Kaveh
  • Molin, Elin
  • Roth, Paula

Abstract

We study how fatal and nonfatal health shocks affect households’ ability to meet their financial obligations. We find that fatal shocks substantially increase the likelihood of default and that housing wealth plays a key role as a self-insurance mechanism. Surviving spouses who experience the largest income losses are more likely to sell their homes, and those without housing wealth face a sharply higher risk of debt collection. Notably, these shocks generate intergenerational spillovers. In contrast, nonfatal health shocks lead to only modest increases in default risk. Taken together, our findings suggest that strengthening survivors’ benefits for households with limited resources could improve welfare across generations.

Suggested Citation

  • Majlesi, Kaveh & Molin, Elin & Roth, Paula, 2026. "When Loss Strikes Twice: Severe Health Shocks and Financial Well-Being," CEPR Discussion Papers 21169, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:21169
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    File URL: https://cepr.org/publications/DP21169
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    Keywords

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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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