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When financials get tough, life gets rough? Problematic debts and ill health

Author

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  • Anne-Fleur Roos

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Maaike Diepstraten
  • Rudy Douven

    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

It is often suggested that problematic debts antecede health problems. In this paper, we investigate whether individuals obtaining problematic debts are more likely to use mental healthcare or social guidance and/or financial help, and whether they have higher mental healthcare costs. We use nationwide individual-level panel data from the Netherlands for the years 2011-2015. We employ a difference-in-differences approach with individual fixed effects and find that obtaining problematic debt is strongly associated with ill (mental) health. We find that average mental healthcare expenditures increased with approximately 200 euro in 2014 and 2015 for individuals who experienced problematic debts in 2013. The effect corresponds to an increase of 30% of individual mental healthcare expenditures because of problematic debts. Furthermore, the use of mental healthcare increased with 7% and the use of social guidance and/or financial assistance increased with 40% after getting into problematic debt. We therefore conclude that policies that prevent people from getting into debt may generate positive external effects by saving on expenditures on healthcare or social guidance and/or financial assistance. It is often suggested that problematic debts antecede health problems. In this paper, we investigate whether individuals obtaining problematic debts are more likely to use mental healthcare or social guidance and/or financial help, and whether they have higher mental healthcare costs. We use nationwide individual-level panel data from the Netherlands for the years 2011-2015. We employ a difference-in-differences approach with individual fixed effects and find that obtaining problematic debt is strongly associated with ill (mental) health. We find that average mental healthcare expenditures increased with approximately 200 euro in 2014 and 2015 for individuals who experienced problematic debts in 2013. The effect corresponds to an increase of 30% of individual mental healthcare expenditures because of problematic debts. Furthermore, the use of mental healthcare increased with 7% and the use of social guidance and/or financial assistance increased with 40% after getting into problematic debt. We therefore conclude that policies that prevent people from getting into debt may generate positive external effects by saving on expenditures on healthcare or social guidance and/or financial assistance.

Suggested Citation

  • Anne-Fleur Roos & Maaike Diepstraten & Rudy Douven, 2021. "When financials get tough, life gets rough? Problematic debts and ill health," CPB Discussion Paper 428, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:428
    DOI: 10.34932/BPNM-1379
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    References listed on IDEAS

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    1. Bridges, Sarah & Disney, Richard, 2010. "Debt and depression," Journal of Health Economics, Elsevier, vol. 29(3), pages 388-403, May.
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    5. Frederick J. Zimmerman & Wayne Katon, 2005. "Socioeconomic status, depression disparities, and financial strain: what lies behind the income‐depression relationship?," Health Economics, John Wiley & Sons, Ltd., vol. 14(12), pages 1197-1215, December.
    6. 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.
    7. John Gathergood, 2012. "Debt and Depression: Causal Links and Social Norm Effects," Economic Journal, Royal Economic Society, vol. 122(563), pages 1094-1114, September.
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    More about this item

    JEL classification:

    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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