The effect of shocks in household debt on health

Abstract

The association between shocks in mortgage debt and health is analyzed by using data from the DNB Household survey from 2003 to 2014. Two measures for individual indebtedness are applied: mortgage debt and the Loan-to-Value ratio. Results show that mortgage debt does not have a direct effect on health, but an indirect effect on health through the Loan-to-Value ratio. Problems of reverse causality are reduced by the Dutch medical insurance system and by using a subsample of constantly employed individuals. Fixed effects and instrumental variables are used to reduce the omitted variable bias and to create a case for causality.