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Economic downturns and mental wellbeing

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

Abstract

We study the impact of the business cycle on mental wellbeing by linking rich German survey data to over a decade of detailed gross domestic product information. 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 negative effects of economic downturns on both life satisfaction and a multidimensional measure of mental health. We provide evidence that these effects are mediated by fear of job loss and income reductions, while actual unemployment effects are negligible. A case study of the impact of the global financial crisis reveals that adverse effects on mental wellbeing are persistent and remained even after the economy recovered.

Suggested Citation

  • Avdic, Daniel & de New, Sonja C. & Kamhöfer, Daniel A., 2020. "Economic downturns and mental wellbeing," DICE Discussion Papers 337, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:337
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    Cited by:

    1. Nicole Black & Angela Jackson & David W. Johnston, 2022. "Whose mental health declines during economic downturns?," Health Economics, John Wiley & Sons, Ltd., vol. 31(1), pages 250-257, January.
    2. Botha, Ferdi & Nguyen, Viet H., 2022. "Opposite nonlinear effects of unemployment and sentiment on male and female suicide rates: Evidence from Australia," Social Science & Medicine, Elsevier, vol. 292(C).
    3. Kathrin Durizzo & Edward Asiedu & Antoinette van der Merwe & Isabel Günther, 2022. "Economic Recovery but Stagnating Mental Health During a Global Pandemic? Evidence from Ghana and South Africa," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(2), pages 563-589, June.

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    More about this item

    Keywords

    business cycle; mental health; life satisfaction; global financial crisis; shift-share instrument;
    All these keywords.

    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development

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