Nandini Chatterjee, University at Albany
This paper applies Grossman's health production model to test the impact of financial market constraints on stock of health held by individuals. It is well known that small borrowers like small firms and households face significant borrowing constraints at the credit market. Such constraints could reduce investment in physical capital by small firms and investment in human capital by households. Although there are some studies that have looked at the impact of borrowing constraints on education, the link between the financial market and the other form human capital has almost not been studied so far. Using self-reported measures from the Survey of Consumer Finances, we study the household's demand for health under credit constraints. Our results suggest that constrained households hold lower level health than the unconstrained households, and there is thus a link between the financial market and this form of human capital.