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Mental health, work incapacity and State transfers: an analysis of the British Household Panel Survey

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  • Whittaker, W;
  • Sutton, M;

Abstract

The UK has experienced substantial increases in the number of individuals claiming work incapacity benefit (IB) and the proportion of people claiming IB for mental health reasons. Following high-profile reports claiming that intervention would cost the State nothing, the Government has increased the availability of psychological therapies. The cost-neutrality claim relied on two statistics: the proportion of IB claimants diagnosed with mental and behavioural disorders; and estimates of the costs to the State of periods on IB. These are cross-sectional associations. We subject these two associations to more rigorous longitudinal analysis using nationally representative data from seventeen waves (1991-2007) of the British Household Panel Survey (BHPS). We model the effect of depression on (a) State transfers and (b) the probability of being on IB whilst controlling for covariates and unobservable heterogeneity. Our results reveal that cross-sectional associations with depression are substantially cnfounded. The estimated effects of becoming depressed on State transfers reduce by 83% and 88%, and on the probability of claiming IB drop to just 0.4 and 0.7 percentage points, for males and females respectively. We conclude that the stated benefits of reducing depression for the State and for labour market participation have been substantially over-estimated.

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Bibliographic Info

Paper provided by HEDG, c/o Department of Economics, University of York in its series Health, Econometrics and Data Group (HEDG) Working Papers with number 10/21.

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Date of creation: Aug 2010
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Handle: RePEc:yor:hectdg:10/21

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Web page: http://www.york.ac.uk/economics/postgrad/herc/hedg/
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Keywords: Work incapacity; Mental health; Dynamic modelling; Unobserved heterogeneity;

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References

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  1. Giulia Faggio & Stephen Nickell, 2005. "Inactivity Among Prime Age Men in the UK," CEP Discussion Papers dp0673, Centre for Economic Performance, LSE.
  2. Paul Contoyannis & Andrew M. Jones & Nigel Rice, 2004. "Simulation-based inference in dynamic panel probit models: An application to health," Empirical Economics, Springer, vol. 29(1), pages 49-77, January.
  3. Disney, Richard & Webb, Steven, 1991. "Why Are There So Many Long Term Sick in Britain?," Economic Journal, Royal Economic Society, vol. 101(405), pages 252-62, March.
  4. Stephen Fothergill, 2001. "The True Scale of the Regional Problem in the UK," Regional Studies, Taylor & Francis Journals, vol. 35(3), pages 241-246.
  5. Duncan McVicar, 2006. "Why do disability benefit rolls vary between regions? A review of the evidence from the USA and the UK," Regional Studies, Taylor & Francis Journals, vol. 40(5), pages 519-533.
  6. Katharina Hauck & Nigel Rice, 2004. "A longitudinal analysis of mental health mobility in Britain," Health Economics, John Wiley & Sons, Ltd., vol. 13(10), pages 981-1001.
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Cited by:
  1. Mariya Melnychuk, 2012. "Mental health and economic conditions: how do economic fluctuations influence mental problems?," Working Papers. Serie AD 2012-08, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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