Financial strain in the United Kingdom

Publication type

Journal Article

Published in

Oxford Economic Papers

Author

Declan French

Publication date

Summary

UK households have been exposed to economic recession followed by a government programme of austerity, putting many under severe financial strain. Using UK longitudinal household data, we find that the feeling of not being able to cope financially matters for individual mental health and general health status even when controlling for individual heterogeneity and potential reverse causation. We develop a theoretical model which brings some of the rigour of lifetime economic decision-making models to bear on our understanding of the causes of financial strain. Our estimation results for this model highlight that shocks to how we view our financial situation are more important for subjective financial well-being than not having enough income or being liquidity constrained. Recent welfare and pension reforms intended to reduce budget deficits may have exacerbated financial strain and thus increased public healthcare costs. In the case of disability benefits reform, we find that the uncertainty generated by an opaque process of reassessment caused financial strain to increase even when households were not materially worse off.

Volume and page numbers

70, 163-182

DOI

https://doi.org/10.1093/oep/gpx030

ISSN

16

Subjects

Psychology, Economics, Income Dynamics, Household Economics, Debt: Indebtedness, Well Being, Health and Economic Policy

Links

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  1. Financial strain in the United Kingdom