The Link between Vulnerability to Poverty and Depression: Evidence from Vietnam

Vulnerability to poverty is a measure of the downside risk of falling into poverty. We examine the relationship between vulnerability to poverty and self-reported mental health, using a four-wave longitudinal panel from rural Vietnam. Our findings indicate that vulnerability to poverty has a significant and adverse connection with an index of depression. The impacts are not only statistically significant but also large. An increase in vulnerability to poverty from zero to one is associated with a 3.3 unit increase in the depression (CES-D) score (or 47.1 percent increase over the sample mean). Moreover, vulnerability to poverty also increases the probability of being severely mentally distressed. An increase in vulnerability to poverty of one standard deviation is associated on average with a 10.5 percentage point increase in the probability of severe mental distress. Risks of poverty that come from idiosyncratic shocks have stronger links to mental health than risks from covariate shocks. Vulnerability to poverty increases the likelihood of depressive symptoms more for men than for women and for the major ethnicity group compared to other ethnicities. Overall, we provide clear evidence that lives marked by greater downside risk are also blemished with higher rates of depressive symptoms.