Evidence from the UK on the link between Debt and Depression

The new issue of the Economic Journal carries a fascinating study in the UK on the links between increased debt burdens and depression. Here’s the abstract of the paper:

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.

The study’s findings are somewhat in contrast to the recent work by Brendan Walsh on the Irish Economy which showed we were bearing up rather well, but to be fair Brendan didn’t look at this link explicitly. An ungated version of the paper by Dr John Gathergood of the University of Nottingham is here (.pdf), the tables at the back of the paper are worth going through if you’re feeling wonkish.

By Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

14 replies on “Evidence from the UK on the link between Debt and Depression”

Does the study also find a corresponding link between Credit and mania?

Maybe western society needs financial Prozac and Lithium pills.

@OMF there is a link between credit and mania, it’s well plumbed by people like Kindleberger and Minsky. There’s a great slide, if I find it I’ll pop it up, of Japanese golf club construction during the years of their boom in the 90s. Everyone felt they had to be a social climber, golf clubs were a way to do that, and so golf club construction exploded.

If the ’emotional reaction’ functions were symmetric about the business/debt cycle, even for a subset of the population, that would be a very interesting and important empirical regularity.

Update: (it’s here, slide 8, http://www.slideshare.net/kinsells/designing-a-strategy-for-economic-recovery)

Maybe that’s why the Irish aren’t up in arms/out on the streets (many posters express surprise that they’re not): we’re too depressed about our debts to get up off the floor.

There were some stats released earlier this week that show suicides in Greece up 23% last year. That’s a big hike.

The strongest finding of the paper is that bad mental health has a strong causal influence leading to debt problems. The reverse causal relationship is discernible in the data, but is much weaker. So when we see evidence for people with (a) debt problems and (b) mental health problems the causality is mostly in the direction (b) => (a), and only slightly in the other direction. This matches my own anecdotal experience — individuals (or families including individuals) with mental health problems tend to get themselves into debt difficulties whereas individuals with strong mental health who happen to get into debt difficulties are often incredibly resilient about their difficulties and do not allow it to excessively impact on their mental health.

Did they find mere correltation, or true causation ? I’m quite skeptical, as accounting for and controlling the other variables would be a very challenging task…

RTE online is reporting interesting news about France being downgraded.

It looks like the rumours were true. (Sorry no link) 🙂

The link between high debt and depression is not surprising.

I recall an estimate of about 20% of the US population having some mental problem.

I guess that like overeating, people with a psychological problem would seek a compensation/ search for a positive release.

What would be interesting would be research on the bubblemania in Ireland and the fear of missing the boat when friends and work colleagues were obsessed with telling people what a killing they were making from property.

I recall meeting a person who had missed the application deadline for Eircom shares.

He was really cheesed off because so many people were talking about what they could make from the floatation.

Back on topic.

I wonder if being a smaller country (stonger family ties, community support) may provide a reason why there appears to be a contrast between UK and Britain in how people react to recession. Our apparent(dont want to generalise) willingness to chat and communicate more may also be a contributing factor.

Maybe the fact that we also had a big recession in 1980`s and into the early 1990`s may also be a contributing factor to a weaker link between recession and individual depression.

A percentage of people with pre-existing mental health problems have debt problems. A percentage of people with debt problems experience mental health problems. A percentage of people with debt problems have no mental health problems. And of course there is the tragic percentage that are no long with us.

Of course there is the percentage with no debt problems but with mental health problems.

@Gregory O’Connor

Having spoken to people in the SVP over Xmas and some other people, including medical friends – ignoring what I see with my own eyes – there clearly are many people in Ireland experiencing stress due to debt and unemployment. I don’t have the figures but the amount of anti-depressants in circulation has almost certainly gone up significantly since the good days. And the proverbial dogs in the street know that suicide rates have increased. Unfortunately, like many others, I have personal knowledge of people in the past few years that have taken this tragic route.

There are still many good people working silently and quietly in the charities doing their best for those less fortunate. One of the few indigenous unsung strengths of the country.

“I recall an estimate of about 20% of the US population having some mental problem.”

That’s a lot of people…. and judging from my experience of working over there….. they’ve all got guns too.

I once worked with a bunch of nutters in Dallas who all had guns and left them in the glove box of their cars parked outside in the public car park. Unbelievable.

Ernie Ball’s comment seems to have disappeared. That’s a shame. It would have served a useful purpose in the public interest. It’s mean-spirited and nasty nature might have opened the eyes of those here and elsewhere who espouse ostensibly ‘left-wing’ positions as to why so many voters are repelled by their antics.

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