By Katherine Guthrie and Jan Sokolowsky
Abstract: We show that obesity is an economically significant predictor of mortgage delinquencies at the county level. In practice, however, loan contracts do not incorporate easily verifiable health risk factors such as obesity. The discrepancy between theory and practice suggests the existence of substantial cross-subsidization and misallocation of funds in the loan market. The potential for business opportunities and policy implications warrants further investigation of our results with more detailed, albeit costly data.
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