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Debt trajectories and mental health

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  • Hojman, Daniel A.
  • Miranda, Álvaro
  • Ruiz-Tagle, Jaime

Abstract

In the last few decades, there was a marked increase in consumer debt in the United States, Latin America and other emerging countries, spurring a debate about the real costs and benefits of household credit. Using a unique longitudinal dataset with detailed health and balance sheet information from a large sample of 10,900 Chilean households we study the relationship between debt trajectories in a three-year time window and mental health. We find that depressive symptoms are higher for those who have been persistently over-indebted, followed by those who transit from moderate to high debt levels. We also find that those who transition from over-indebtedness to moderate debt levels have no additional depressive symptoms compared to those with trajectories of moderate debt throughout (never over-indebted). This suggests that the debt-related contribution to depressive symptoms vanishes as debt levels fall. The association between debt and depressive symptoms seems to be driven by non-mortgage debt -primarily consumer credit- or late mortgage payments; secured debt (secured by collateral) per se is not associated with depressive symptoms. Policy interventions to reduce the negative association of over-indebtedness on mental health are discussed.

Suggested Citation

  • Hojman, Daniel A. & Miranda, Álvaro & Ruiz-Tagle, Jaime, 2016. "Debt trajectories and mental health," Social Science & Medicine, Elsevier, vol. 167(C), pages 54-62.
    • Handle: RePEc:eee:socmed:v:167:y:2016:i:c:p:54-62
    DOI: 10.1016/j.socscimed.2016.08.027
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    More about this item

    Keywords

    Debt; Over-indebtedness; Credit; Depression;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G2 - Financial Economics - - Financial Institutions and Services

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