Home Equity Mitigates the Financial and Mortality Consequences of Health Shocks: Evidence from Cancer Diagnoses
Abstract: This paper explores the relationship between home equity, financial distress, and cancer-related mortality. We find that highly-levered patients are more likely to refuse medical treatment and exhibit worse mortality in the aftermath of cancer diagnoses. Cancer is financially destabilizing for negative equity individuals—as measured by mortgage defaults, foreclosures, and bankruptcy—even among households with health insurance. By contrast, individuals with home equity are more likely to extract this equity in response to diagnosis, accept recommended therapies, do not exhibit financial distress, and have higher post-diagnosis survival rates. Our findings highlight the role of real estate in helping individuals buffer idiosyncratic shocks.
Written in collaboration with Edward R. Morrison, Catherine R. Fedorenko, and Scott D. Ramsey.
Finance Seminars at Caltech are funded through the generous support of The Ronald and Maxine Linde Institute of Economic and Management Sciences (lindeinstitute.caltech.edu).
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