Unemployment Expectations, Credit Commitments and Psychological Health
Using individual-level panel data, this paper examines the relationship between subjective unemployment expectations and psychological health. Individuals expecting to become unemployed within the next year exhibit higher rates of suffering from anxiety plus worse psychological health based on the General Health Questionnaire (GHQ) Caseness measure. We investigate the role of household credit commitments in this relationship. In our sample holding credit is associated with better psychological health. However, credit commitments worsen the relationship between expected unemployment and psychological health. The strongest effect is found for unsecured credit, with the average effect of expected unemployment on psychological health is approximately twice as severe among those with outstanding unsecured credit commitments.
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