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Mental Health and Labour Market Participation: Evidence from IV Panel Data Models

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Author Info

  • Frijters, Paul

    ()
    (University of Queensland)

  • Johnston, David W.

    ()
    (Monash University)

  • Shields, Michael A.

    ()
    (Monash University)

Abstract

A large body of empirical research links mental health and labour market outcomes; however, there are few studies that effectively control for the two-way causality between work and health and the existence of unobserved individual characteristics that might jointly determine health and labour market outcomes. In this study, we estimate the effect of mental health on labour market participation using various models, including instrumental variable models that exploit individual variation observed in panel data. We find robust evidence that a reduction in mental health has a substantial negative impact on the probability of actively participating in the labour market. We calculate that a one standard deviation decrease in mental health decreases the probability of participation by around 17 percentage points. This effect is larger for females and for older individuals. We therefore provide robust evidence that there are substantial costs due to the lost productivity resulting from poor mental health.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4883.

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Length: 28 pages
Date of creation: Apr 2010
Date of revision:
Handle: RePEc:iza:izadps:dp4883

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Related research

Keywords: measurement error; mental health; labour market participation; causality;

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  1. Mental Health and Labour Market Participation
    by Liam Delaney in Geary Behaviour Centre on 2010-08-10 21:58:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Francesca Cornaglia & Naomi E. Feldman & Andrew Leigh, 2014. "Crime and Mental Well-Being," Journal of Human Resources, University of Wisconsin Press, University of Wisconsin Press, vol. 49(1), pages 110-140.
  2. Maren M. Michaelsen, 2012. "Mental Health and Labour Supply – Evidence from Mexico‘s Ongoing Violent Conflicts," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0378, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Baert, Stijn & De Visschere, Sarah & Schoors, Koen & Omey, Eddy, 2014. "First Depressed, Then Discriminated Against?," IZA Discussion Papers, Institute for the Study of Labor (IZA) 8320, Institute for the Study of Labor (IZA).

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