Debt and Depression: Causal Links and Social Norm Effects


  •  Corresponding author: John Gathergood, School of Economics, Sir Clive Granger Building, University of Nottingham, Nottingham NG7 2RD, UK. Email:

  • I thank the Economic and Social Research Council for providing funding for my post-doctoral research fellowship, under grant number PTA-026-27-1664. The data and tabulations used in this publication were made available through the ESRC Data Archive. The data were originally collected by the ESRC Research Centre on Micro-social Change at the University of Essex (now incorporated within the Institute for Social and Economic Research). Neither the original collectors of the data nor the Archive bear any responsibility for the analyses or interpretations presented here.


Individuals exhibiting problems repaying their debt obligations also exhibit much worse psychological health. Selection into problem debt on the basis of poor psychological health accounts for much of this difference. The causality between problem debt and psychological health may be two way. Using individual level UK panel data, local house price movements exogenous to individual households are used to establish the causality from problem mortgage debt to psychological health. In addition, the social norm effects of problem debt are investigated using local bankruptcy and repossession rates. Results indicate there are sizeable causal links and social norm effects in the debt–psychological health relationship.