Year: 2016
Working Paper Number: 391
Unit: SSU
Author:
Ralph A. Ssebagala
Abstract:
While it is well documented that severe consumer indebtedness can lead to mental and physical health problems, as well as unhealthy coping mechanisms, the pathways from poor health to financial strain is still an understudied area. Using data from the National Income Dynamics Study (NIDS), this study examines the relationship between poor health and debt distress controlling for the possible endogeneity between these two conditions as well as some health-related variables. The results indicate that poor health significantly increases the probability of financial strain. Insofar as poor health is associated with catastrophic healthcare costs and income deprivation, for instance through inability to work, other factors that affect health such as socioeconomic status and insurance might shape the contours of consumers’ debt performances in the face of health risk. In the end, health may be creating a vicious circle in which poor health affects the capacity to earn income and accumulate assets, which limits access to quality health care.
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