Inequality in high-cost borrowing and unemployment insurance generosity in US states during the COVID-19 pandemic.

US consumers may turn to the private market for credit when income and government benefits fall short. The most vulnerable consumers have access only to the highest-cost loans. Prior research on trade-offs of credit with government welfare support cannot distinguish between distinct forms of unsecured credit due to data limitations. Here we provide insight on credit-welfare state trade-offs vis-à-vis unemployment insurance generosity by leveraging a large sample of credit data that allow us to separate credit cards, personal loans and alternative financial services loans and to analyse heterogeneity in credit use by household income. We find that more generous state unemployment insurance benefits were associated with a lower probability of high-cost credit use during the first seven quarters of the coronavirus disease 2019 (COVID-19) pandemic. This inverse association was concentrated among consumers living in low-income households. Our results support theories that public benefits are inversely associated with the use of costly credit.

Mortgage Borrowing and Chronic Disease Outcomes in Older Age: Evidence From Biomarker Data in the Health and Retirement Study.

OBJECTIVES: The medical diagnosis of a disease is common in older age and can carry significant financial costs. For many older adults, equity in a home is their primary component of wealth; however, housing wealth is illiquid. We analyze the relationship between the liquidation of housing wealth through mortgage borrowing on older homeowners' ability to successfully control a disease. METHODS: We use data on homeowners aged 65 and older from the 1998-2016 waves of the Health and Retirement Study (N = 3,457). We use biomarkers and physical health indicators to measure disease control following a medical diagnosis of diabetes, heart condition, high blood pressure, lung disease, or cancer. Random effects linear probability and instrumental variable regressions estimate the associations of housing wealth, new mortgage borrowing, and disease control. RESULTS: Descriptively, 28% of older homeowners who borrow against home equity are not controlled on their disease, compared to 33% of non-borrowers. Panel data instrumental variable regressions show that each $10,000 borrowed from home equity after diagnosis is associated with a 17-percentage-point reduction in the probability of the disease not being controlled. DISCUSSION: Many older adults are not able or willing to liquidate housing wealth, and the ability to borrow also depends on changes in home values. Thus, housing wealth is not a uniform social determinant of health but is shaped by older adults' participation in financial markets.

Managing the onset of a new disease in older age: Housing wealth, mortgage borrowing, and medication adherence.

The relationship between wealth and health is an important yet complex topic for health research. While prior studies document the importance of wealth for healthy aging, the understanding of the mechanisms through which wealth supports health consumption is limited. We investigate the wealth-to-health link by explicitly modeling the effect of liquidating home equity through borrowing on health expenditures, measured here as cost-related non-adherence to prescription medications (CRN), following the onset of one of six costly diseases on or after age 65. Using individual-level data from the 2002-2018 waves of the U.S. Health and Retirement Study (3,772 respondents; 13,708 observations), we exploit exogenous spatial and intertemporal variation in ZIP-code level house values to instrument for borrowing. Results indicate each additional $10,000 in new mortgage borrowing is associated with a 1.6 percentage point reduction in CRN. In subsample regressions, this relationship is strongest for older adults for whom home equity is their largest source of wealth. In a falsification test, we find no relationship between house value changes and CRN for older renters, and no effect of mortgage borrowing on prescription drug non-adherence for health or memory reasons. Our results contribute to the literature by documenting how housing wealth can be tapped by older adults through borrowing to smooth health-related consumption following disease diagnosis. However, not all older homeowners are willing or able to borrow from home equity. Our findings suggest that it is not simply the stock of housing wealth that leads to better health outcomes, but instead the liquidation of housing wealth. Housing wealth is thus not a uniform social determinate of health for older homeowners as it is moderated by the ability to borrow.