Bellwether: Health Effects of Transitory Economic Fluctuations
This study investigates the mental health effects of transitory economic fluctuations. I estimate a reduced form equation for mental health production using OLS, fixed effects, and random effects models with the individual as the unit of observation. I test for robustness by assessing the general physical health effects resulting from transitory economic fluctuations. Across all models, I control for demographics, health behaviors, and medical care; economic fluctuations are proxied by unemployment and economic growth. I find mixed evidence to support the hypothesis that mental health deteriorates during economic downturns and its obverse. While in the most preferred model I find strong evidence that increases in the unemployment rate and a more rapidly growing economy may be the driving forces behind mental health deterioration, in less favorable but valid models I was able to confirm more recent alternative findings that health improves during economic downturns. I conclude that both effects operate simultaneously, with one overcoming the other across different circumstances. The appropriate policy prescription for ameliorating undesirable mental health effects derived from economic fluctuations could change drastically depending upon which factor - unemployment or economic growth - drives the changing mental health status.
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