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Keywords:

  • D12;
  • D14;
  • I12;
  • debt;
  • fixed-effects;
  • health satisfaction;
  • mental health;
  • obesity

We analyze the association between household indebtedness and different health outcomes using data from the German Socio-Economic Panel from 1999 to 2009. We control for unobserved heterogeneity by applying fixed-effects methods and furthermore use a subsample of constantly employed individuals plus lagged debt variables to reduce problems of reverse causality. We apply different measures of household indebtedness, such as the percentage shares of household income spent on consumer credit and home loan repayments (which indicate the severity of household indebtedness) and a binary variable of relative overindebtedness (which indicates a precarious debt situation). We find all debt measures to be strongly correlated with health satisfaction, mental health, and obesity. This relationship vanishes for obesity after controlling for unobserved heterogeneity while it stays significant with respect to worse physical and mental health.