CHE Seminar Series: Severe health shocks and financial well-being
We examine the effect of fatal and nonfatal health shocks on households' defaults on debts and payments. We find that fatal health shocks are a major cause of defaults and, importantly, this behavior is solely visible among surviving spouses who experience a significant negative permanent income shock and lack sufficient resources, notably housing wealth, to fulfill larger financial obligations. We provide supportive evidence that this behavior is not driven by inattention. Furthermore, these shocks have intergenerational consequences, as children of surviving spouses with less resources are more likely to be forced into debt collection. These findings in a country with relatively generous welfare system manifest the graveness of background risks among poorer households and suggest potential for improving the design of social insurance programs. In addition, we find that nonfatal health shocks lead to an immediate, but mostly temporary, increase in the likelihood of default.
Speaker profile
Kaveh Majlesi is a Professor of Economics at Monash University and a part-time Professor at Lund University in Sweden. He is also a Research Fellow at CEPR and IZA. His main areas of research are Labor and Finance, Household Finance, Labor Economics, and Political Economy.
Weekly seminar series
As part of our Centre's vibrant research culture, we host a weekly seminar series. Visiting and invited researchers present current research relating to the economics of health and wellbeing, and the healthcare sector. Visitors are welcome to join these sessions where discussion and debate is encouraged.
For further information on our seminar series, please contact Trong-Anh.Trinh@monash.edu.
Event Details
- Date:
- 7 August 2024 at 12:00 pm – 1:00 pm
- Venue:
- Caulfield campus, Building H, Level 9, Room H914
- Categories:
- CHE Seminar; General
Description
We examine the effect of fatal and nonfatal health shocks on households' defaults on debts and payments. We find that fatal health shocks are a major cause of defaults and, importantly, this behavior is solely visible among surviving spouses who experience a significant negative permanent income shock and lack sufficient resources, notably housing wealth, to fulfill larger financial obligations. We provide supportive evidence that this behavior is not driven by inattention. Furthermore, these shocks have intergenerational consequences, as children of surviving spouses with less resources are more likely to be forced into debt collection. These findings in a country with relatively generous welfare system manifest the graveness of background risks among poorer households and suggest potential for improving the design of social insurance programs. In addition, we find that nonfatal health shocks lead to an immediate, but mostly temporary, increase in the likelihood of default.
Speaker profile
Kaveh Majlesi is a Professor of Economics at Monash University and a part-time Professor at Lund University in Sweden. He is also a Research Fellow at CEPR and IZA. His main areas of research are Labor and Finance, Household Finance, Labor Economics, and Political Economy.
Weekly seminar series
As part of our Centre's vibrant research culture, we host a weekly seminar series. Visiting and invited researchers present current research relating to the economics of health and wellbeing, and the healthcare sector. Visitors are welcome to join these sessions where discussion and debate is encouraged.
For further information on our seminar series, please contact Trong-Anh.Trinh@monash.edu.