Household Financial Wellbeing During the COVID‐19 Pandemic: An Instrumental Variable Approach

Nilton Porto, Gary R. Mottola and Olivia Valdes

Journal of Consumer Affairs, 2025, vol. 59, issue 2

Abstract: Using data from the 2021 wave of the FINRA Foundation's National Financial Capability Study (NFCS), collected between June and October 2021, we found that adults in households where at least one member contracted the COVID‐19 virus had lower financial wellbeing and were more likely to be financially fragile than those in which no members had contracted the virus. Our analyses also revealed that COVID‐19‐positive households were more likely to report experiencing objective general financial difficulties and difficulties specifically tied to medical costs and debt. Further, to assess whether evidence of a causal link between a COVID‐19 infection and negative financial outcomes existed, we used state vaccination rates as an instrumental variable. Our analysis supported a causal link and contributes to a growing body of research on the effects of the pandemic on household finances. Together, our findings can inform how policy makers and other stakeholders may want to respond to the financial repercussions caused by future global health crises and disruptions.

Date: 2025
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