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Financial Strain in the United Kingdom

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  • Declan French

Abstract

UK households have been exposed to economic recession followed by a government programme of austerity. As a result, many households have been under severe financial strain. Using a large UK household survey, we find that the feeling of not being able to cope financially matters for individual mental and physical health even when controlling for individual heterogeneity and potential reverse causation. We develop a theoretical model which brings some of the rigour of lifetime economic decision-making models to bear on our understanding of the causes of financial strain. Our estimation results for this model highlight that shocks to how we view our financial situation are more important for subjective financial well-being than not having enough income or being liquidity constrained. Recent welfare and pension reforms intended to reduce budget deficits may have exacerbated financial strain and increased public health care costs. In the case of disability benefits reform, we find that the uncertainty generated by an opaque process of reassessment caused financial strain to increase even when households were not materially worse off.

Suggested Citation

  • Declan French, 2016. "Financial Strain in the United Kingdom," CHaRMS Working Papers 16-02, Centre for HeAlth Research at the Management School (CHaRMS).
  • Handle: RePEc:qub:charms:1602
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    Cited by:

    1. French, Declan & Vigne, Samuel, 2019. "The causes and consequences of household financial strain: A systematic review," International Review of Financial Analysis, Elsevier, vol. 62(C), pages 150-156.
    2. Belmonte, A & Pickard, H, 2022. "Safe at Last? LATE Effects of a Mass Immunization Campaign on Households’ Economic Insecurity," CAGE Online Working Paper Series 604, Competitive Advantage in the Global Economy (CAGE).
    3. Ferdi Botha & John P. New & Sonja C. New & David C. Ribar & Nicolás Salamanca, 2021. "Implications of COVID-19 labour market shocks for inequality in financial wellbeing," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(2), pages 655-689, April.
    4. Botha, Ferdi & de New, John P. & de New, Sonja C. & Ribar, David C. & Salamanca, Nicolás, 2020. "COVID-19 labour market shocks and their inequality implications for financial wellbeing," GLO Discussion Paper Series 661, Global Labor Organization (GLO).
    5. Brown, Sarah & Ghosh, Pulak & Pareek, Bhuvanesh & Taylor, Karl, 2021. "The protective role of saving: Bayesian analysis of British panel data," Journal of Empirical Finance, Elsevier, vol. 63(C), pages 57-72.

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    More about this item

    Keywords

    Financial strain; Health; Permanent income;
    All these keywords.

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General

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