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Economic downturns and mental health in Germany

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  • Avdic, Daniel
  • de New, Sonja C.
  • Kamhöfer, Daniel A.

Abstract

We study the impact of the macroeconomic environment on mental health in Germany. Endogeneity concerns are tackled using a shift-share instrumental variables approach in which exposure to macroeconomic fluctuations is estimated from regional variations in historical industry sector composition. Estimation results reveal strong procyclical effects on the 12-item short form survey’s mental health component summary score. These results are supported by corresponding estimates for self-assessed life satisfaction and objective mental health-related hospitalizations. Effects mainly operate through worries about future job loss and income reductions, while actual unemployment and income effects are small. An event study of the impact of the Great Recession reveals that adverse effects on mental health are persistent and remained even after the economy recovered.

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  • Avdic, Daniel & de New, Sonja C. & Kamhöfer, Daniel A., 2021. "Economic downturns and mental health in Germany," European Economic Review, Elsevier, vol. 140(C).
    • Handle: RePEc:eee:eecrev:v:140:y:2021:i:c:s001429212100221x
    DOI: 10.1016/j.euroecorev.2021.103915
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    More about this item

    Keywords

    Business cycle; Mental health; Well-being; Great Recession; Shift-share instrument;
    All these keywords.

    JEL classification:

    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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