Financial Distress and Birth Outcomes

Monday, June 24, 2019: 10:00 AM
Jackson - Mezzanine Level (Marriott Wardman Park Hotel)

Presenter: Ausmita Ghosh

Co-Author: Melinda Pitts

Discussant: Andrew Friedson

In contrast to previous economic downturns, the “Great Recession” of the late 2000s was markedly distinct in that it resulted in precipitous declines in housing prices, placing American families and communities in economic insecurity. The Great Recession reduced average wealth sharply, driven mainly by declines in home equity (McKernan et al., 2014). Recent research has documented that economic shocks such as housing market upheavals are associated with elevated mental stress (Currie & Tekin, 2015; Houle, 2014) and increased anti-depressant use (Lin et al., 2013). There is substantial evidence that in-utero conditions are significantly associated with health at birth and later-life well-being. However, the literature on the effect of financial stress on in-utero health is surprisingly sparse (see Lhila & Simon, 2010). The Great Recession presents an excellent opportunity to uncover the relationship between financial stress and pregnancy outcomes, as it significantly affected housing prices and financial wealth, and housing wealth accounts for almost a third of total net worth for US households. The housing crisis was characterized by high rates of delinquency and foreclosure, which could affect birth outcomes through depressing neighborhood housing values, thus limiting the ability of credit constrained households to smooth consumption during the economic downturn, or through the effect of vacant properties attracting crime and vandalism in the neighborhood.

In this study, we investigate the influence of the housing crisis on fertility and pregnancy outcomes (birth weight and gestational age), by integrating vital statistics natality files with the the Federal Reserve Bank of New York/Equifax Consumer Credit Panel, which is a nationally representative 5% random sample of consumers in the US that have information in consumer credit data system. The financial health information includes foreclosures, bankruptcies and severe delinquencies, which are accounts that are 90 days or more past due and are eligible for collections. The analysis period is from 2004-2016, whichincludes the housing boom and bust, as well as the Great Recession and the subsequent recovery.

In this analysis we examine the relationship between fertility rates and birth outcomes and local area financial health to provide more evidence on the role of financial stressors on infant health outcomes. Preliminary evidence suggests that increased financial distress, as measured by county-level rates of foreclosures, bankruptcies and delinquencies, lead to reductions in fertility and an increased probability of poor birth outcomes. The results show that foreclosures had a stronger impact than other measures, suggesting that housing insecurity is a primary stressor for expectant mothers. Future analysis will expand the types of financial stressors to include changes in average home prices and interest rates, changes in home ownership rates, and specific types of non-housing related delinquencies, including auto and revolving credit.