Poor health as a precursor to consumer debt distress in South Africa

ABSTRACT

While it is well documented that severe consumer indebtedness can lead to mental and physical health problems including unhealthy coping mechanisms, the pathways from poor health to financial strain is still an understudied area. Using the National Income Dynamics Study (NIDS) data, this study examines the relationship between poor health and debt distress while controlling for the possible endogeneity between these two conditions and some health-related variables. The results indicate that poor health significantly increases the probability of financial strain. Insofar as poor health is associated with catastrophic healthcare costs and income deprivation, for instance through inability to work, other factors affecting health such as socioeconomic status and insurance might shape the contours of consumers’ debt performances in the face of health risk. Ultimately, health may be creating a vicious circle in which poor health affects the capacity to earn income and accumulate assets, which limits access to quality healthcare.

KEYWORDS:

• Debt distress
• poor health
• over-indebtedness
• SES
• NIDS

Acknowledgement

This is a comprehensively revised version of Chapter Four of Ralph A. Ssebagala’s PhD thesis submitted in November 2014 to the Doctoral Degree Board of the University of Cape Town. Greater detail on the study may be found in Ssebagala, RA. (2015). ‘The dynamics of consumer credit and household indebtedness in South Africa’. The author’s PhD was partially funded by grants to the CSSR and the UCT postgraduate funding office. The author would like to thank the anonymous reviewers for their insightful comments and suggestions that greatly contributed to the improvement of this paper. A pre-peer review version of this work (Ssebagala, 2016a) can be found on the CSSR website as ‘CSSR Working Paper No. 391’ via the following link: http://www.cssr.uct.ac.za/cssr/pub/wp/391.

Disclosure statement

No potential conflict of interest was reported by the author.

ORCID

Ralph A Ssebagala http://orcid.org/0000-0001-8200-5910