A Competing-Risks Mediation Analysis from HILDA
Acute health shocks — serious illness, injury, hospitalisation — are among the largest negative life events in working-age Australian households and they translate into financial hardship through a measurably heterogeneous set of pathways. Some households access formal welfare support; others rely on informal help from friends and family; still others sell or pawn assets to maintain consumption; some default on bills or rent; and some, conditional on socioeconomic position, do all of these in succession. The household-finance literature has documented post-health-shock hardship at the aggregate level but has not jointly modelled the pathway choice as a behavioural-decision problem.
This paper makes three contributions, conditional on the HILDA Survey Research Conference 2026 submission and the post-conference Journal of Banking and Finance target. The first contribution is empirical: a competing-risks decomposition of post-health-shock financial hardship into seven pathways, using the existing rebuilt HILDA analytical panel as the household-covariate backbone and newly extracted leins / ghmh / ghmcs / ghpcs variables as the shock and mental-health measurement layer. The second contribution is heterogeneity: pathway choice differs systematically by socioeconomic status, with formal-welfare access concentrated among lower-income households, informal help among middle-income households, and asset liquidation among households with non-liquid wealth but constrained income. The third contribution is mediation: the hardship pathway — not just hardship occurrence — predicts the subsequent mental-health trajectory of partners and other family members, providing the first competing-risks mediation estimate of intra-household psychological contagion in the post-health-shock setting.
The behavioural-economics frame draws on the dual-process account of financial-decision behaviour under stress. Health shocks impose a high cognitive load that constrains deliberate financial planning, and the pathway chosen reflects both the household's pre-shock financial-capability inventory and the institutional access available to them. Under a pure consumption-smoothing model, all households would choose the lowest-cost pathway available; under a behavioural model, the choice is shaped by pre-shock psychological capital, financial capability, and trust in institutions, with predictable consequences for the post-shock mental-health trajectory of every household member.
The empirical setting is HILDA Release 22 (waves 1–22, 2001–2022), 454,861 person-wave rows × 140 columns of the rebuilt analytical panel, augmented with leins (serious illness/injury event indicator), ghmh (SF-36 Mental Health subscale), ghmcs (Mental Component Summary), and ghpcs (Physical Component Summary) saved to data/paper2_new_variables.parquet. The analysis applies a competing-risks decomposition over the seven pathway alternatives, pathway-choice multinomial models stratified by SES, and a mediation analysis (Imai–Keele framework adapted to the panel) linking pathway choice to partner-and-family mental-health change at t+1, t+2, and t+3. The paper sits alongside PUB3 (Shared Burden, Separate Scars — intra-household financial-anxiety contagion in the broader job-loss setting) as a health-shock-specific companion within the intra-household-finance programme. Submission target HILDA Survey Research Conference 2026 (1–2 October 2026, Melbourne); post-conference journal target Journal of Banking & Finance.