Economic Downturns and Mental Wellbeing
Daniel Avdic (),
Sonja de New and
Daniel A. Kamhöfer
No 1081, SOEPpapers on Multidisciplinary Panel Data Research from DIW Berlin, The German Socio-Economic Panel (SOEP)
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.
Keywords: Business cycle; mental health; life satisfaction; global ﬁnancial crisis; shift-share instrument (search for similar items in EconPapers)
JEL-codes: C36 E32 I15 (search for similar items in EconPapers)
Pages: 37 p.
New Economics Papers: this item is included in nep-hap, nep-hea and nep-mac
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Working Paper: Economic downturns and mental wellbeing (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwsop:diw_sp1081
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