TY - UNPB

T1 - Household Leverage and Mental Health Fragility

AU - Andersen, Asger Lau

AU - Jørgensen, Mia Renee Herløv

AU - iyer, rajkamal

AU - Johannesen, Niels

AU - Peydró, José-Luis

PY - 2022

Y1 - 2022

N2 - We use detailed administrative records to show that high household leverage increases mental health fragility, with persistent negative economic effects. After adverse life events, e.g. heart attacks or job losses, individuals with higher ex ante leverage experience larger increases in mental health problems. The effects are long-lasting and stronger in times of financial crisis. Parallel pre-trends, robustness to non-parametric controls, and IV estimation suggest the results are not driven by confounding unobservables. High leverage is also associated with worse long-run earnings dynamics at the time when loan arrears and mental health problems emerge, suggesting tenacious scarring effects of leverage.

AB - We use detailed administrative records to show that high household leverage increases mental health fragility, with persistent negative economic effects. After adverse life events, e.g. heart attacks or job losses, individuals with higher ex ante leverage experience larger increases in mental health problems. The effects are long-lasting and stronger in times of financial crisis. Parallel pre-trends, robustness to non-parametric controls, and IV estimation suggest the results are not driven by confounding unobservables. High leverage is also associated with worse long-run earnings dynamics at the time when loan arrears and mental health problems emerge, suggesting tenacious scarring effects of leverage.

M3 - Working paper

VL - DP17711

BT - Household Leverage and Mental Health Fragility

PB - Centre for Economic Policy Research, CEPR

ER -