Does debt affect health? Cross country evidence on the debt-health nexus.

We investigate the relationship between aggregate household debt and aggregate health outcomes across 17 European countries over the period 1995 to 2012. Using a dataset of country-level standardized and objective measures of household debt, health outcomes and a rich set of control variables, we estimate an instrumental variable (GMM) model to address possible reverse causality concerns. We find that aggregate household debt affects health outcomes, and that this varies by the maturity of debt. Both short and medium-term debt has a positive effect on health outcomes. Long-term unsecured debt and mortgage debt are associated with poorer health outcomes. These findings are robust after controlling for alternative measures of health and debt. Overall, the results suggest that aggregate household debt is an important determinant of aggregate health outcomes across countries.