When Loss Strikes Twice: Severe Health Shocks and Financial Well-Being

Kaveh Majlesi, Elin Molin and Paula Roth

No 21169, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study how fatal and nonfatal health shocks affect households’ ability to meet their financial obligations. We find that fatal shocks substantially increase the likelihood of default and that housing wealth plays a key role as a self-insurance mechanism. Surviving spouses who experience the largest income losses are more likely to sell their homes, and those without housing wealth face a sharply higher risk of debt collection. Notably, these shocks generate intergenerational spillovers. In contrast, nonfatal health shocks lead to only modest increases in default risk. Taken together, our findings suggest that strengthening survivors’ benefits for households with limited resources could improve welfare across generations.

Keywords: Health; shocks (search for similar items in EconPapers)
JEL-codes: D14 G22 G51 I12 (search for similar items in EconPapers)
Date: 2026-02
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