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Broke, Ill, and Obese: The Effect of Household Debt on Health

  • Matthias Keese
  • Hendrik Schmitz

We analyze the effect of household indebtedness on different health outcomes using data from the German Socio-Economic Panel from 1999-2009. To establish a causal effect, we rely on (a) fixed-effects methods, (b) a subsample of constantly employed individuals, and (c) lagged debt variables to rule out problems of reverse causality. We apply different measures of household indebtedness, such as the percentage shares of household income spent on consumer credit and home loan repayments (which indicate the severity of household indebtedness) and a binary variable of relative overindebtedness (which indicates a precarious debt situation). We find all debt measures to be strongly correlated with health satisfaction, mental health, and obesity. Controlling for unobserved heterogeneity and reversed causality we find evidence that household debt also causally deteriorates physical and mental health. However, there is no causal effect on being obese.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.366778.de/diw_sp0350.pdf
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Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 350.

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Length: 28 p.
Date of creation: 2010
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp350
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  1. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07.
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