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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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    Keywords

    Financial strain; Health; Permanent income;

    JEL classification:

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

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