Long-standing financial distress: do people adapt?

Publication type

Conference Paper

Author

Ujjwal Kumar Das

Publication date

Summary

Financial distress detriments individual’s mental health and well-being. But do people gradually adapt to a long-standing financial distress as the negative effects fade away over time? Analysing a combined panel of 18 years of British Household Panel Survey and 5 years of Understanding Society, this paper examines if individuals’ well-being returns to the base level in the face of long-standing financial distress. Result shows, individuals life satisfaction does not return to the base level even after five consecutive years of such distress. People’s well-being lose in the face of financial distress seems hard to regain. Degree of anticipation and adaptation varies across the well-being distribution as well as with the measures of well-being. Individuals with low psychological well-being (PWB) take longer time to adapt than individuals with higher PWB. Significant anticipation effect is also found – individuals’ well-being is negatively affected even before the actual financial distress is reported. These findings call for policy attention as they indicate that adaptive defence is not likely to work in the face of prolonged negative stimuli of financial distress. Detrimental impact of long-standing financial distress on mental health could be even higher than it is generally estimated.

Subjects

Psychology, Economics, Income Dynamics, Well Being, Health and Finance

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