Mental health, work incapacity and State transfers: an analysis of the British Household Panel Survey
AbstractThe 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 InfoPaper 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.
Date of creation: Aug 2010
Date of revision:
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More information through EDIRC
Work incapacity; Mental health; Dynamic modelling; Unobserved heterogeneity;
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
- I10 - Health, Education, and Welfare - - Health - - - General
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
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