Health and Financial Fragility: Evidence from Car Crashes and Consumer Bankruptcy

Authors

Edward R. Morrison, Columbia Law SchoolFollow
Arpit Gupta, NYU Stern School of BusinessFollow
Lenora M. Olson, University of Utah School of MedicineFollow
Lawrence Cook, University of Utah School of MedicineFollow
Heather Keenan, University of Utah School of MedicineFollow

Document Type

Working Paper

Publication Date

2013

Abstract

This paper assesses the importance of adverse health shocks as triggers of bankruptcy filings. We view car crashes as a proxy for health shocks and draw on a large sample of police crash reports linked to hospital admission records and bankruptcy case files. We report two findings: (i) there is a strong positive correlation between an individual's pre-shock financial condition and his or her likelihood of suffering a health shock, an example of behavioral consistency; and (ii) after accounting for this simultaneity, we are unable to identify a causal effect of health shocks on bankruptcy filing rates. These findings emphasize the importance of risk heterogeneity in determining financial fragility, raise questions about prior studies of "medical bankruptcy," and point to important challenges in identifying the triggers of consumer bankruptcy.

Disciplines

Bankruptcy Law | Law | Law and Economics

Recommended Citation

Edward R. Morrison, Arpit Gupta, Lenora M. Olson, Lawrence Cook & Heather Keenan, Health and Financial Fragility: Evidence from Car Crashes and Consumer Bankruptcy, Columbia Business School Research Paper No. 13-81; University of Chicago Law School, Coase-Sandor Institute for Law & Economics Working Paper No. 655 (2013).
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/2414