Jonas Maibom, Aarhus University

"The Effects of Individual Debt Relief on Health"

Abstract

Individuals with extensive debt may be granted debt relief in court. We provide empirical evidence of how debt relief affects individual health such as long-term mortality, hospitalization and prescription drugs. Our data on the universe of applicants for debt relief in Denmark is collected from court records and linked to nationwide Danish registers. Using quasi-random assignment of applicants to court trustees with varying admission rates, we show that debt relief leads to a significant reduction in hospital usage and a large - but (somewhat) imprecise - decrease in mortality 20 and 25 years after applying. The reduction in hospital visits is partly explained by a reduction in diagnosis codes related to problems with the Cardiovascular and Respiraratory systems. We also find a large reduction in the use of prescription drugs. Our results suggest that it is in the long run being granted debt relief improves health, and that the economic value of the health effect is of similar size (or larger) as the previously documented improvements in labor market outcomes. Estimating impacts across subgroups also reveal that health benefits also arise for groups where labor market responses are limited (e.g. older workers).

For more information about Jonas Maibom and hans interesting work - link to her website.

Contact person: Nikolaj A. Harmon