Debt and depression

We examine the effect of household financial indebtedness on psychological well-being using a large household survey of families with children in Britain. Existing studies that find a link between debt and depression tend to utilise small and highly selective samples of people and only self-reported measures of financial stress, responses to which are likely to correlate with subjective measures of health. From additional household data, we can construct a variety of 'objective' quantitative measures of financial stress in order to validate self-reported measures. We show that, although there is a positive association between subjective measures of financial well-being and psychological well-being, individuals differ in their psychological response to objective household financial situations. We also examine how the potential simultaneity of financial and psychological health might be handled. (C) 2010 Elsevier B.V. All rights reserved.