The Macroeconomics of Intergenerational Mental Health Dynamics

Boaz Abramson, Job Boerma, Diego Daruich and Aleh Aleh
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Boaz Abramson: Columbia GSB
Job Boerma: University of Wisconsin-Madison
Diego Daruich: University of Southern California
Aleh Aleh: Yale University

No 2528, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We develop a quantitative macroeconomic theory of child mental health. The theory is grounded in child psychiatry, formalized in a life-cycle heterogeneous agent model of child development, and disciplined using micro data on mental health of children and parents. Intergenerational transmission of mental illness arises due to both biological factors and parental behavior. Parents experiencing mental illness have negative expectations and lose time due to rumination. As a result, they invest less in their child's mental health. We use the model to evaluate policies designed to improve child mental health. We show that subsidizing mental health treatment for children generates sizable welfare gains.

Date: 2026-05
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