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Bounding the Causal Effect of Unemployment on Mental Health: Nonparametric Evidence from Four Countries

Listed author(s):
  • Cygan-Rehm, Kamila

    ()

    (University of Erlangen-Nuremberg)

  • Kühnle, Daniel

    ()

    (University of Erlangen-Nuremberg)

  • Oberfichtner, Michael

    ()

    (University of Erlangen-Nuremberg)

An important, yet unsettled, question in public health policy is the extent to which unemployment causally impacts mental health. The recent literature yields varying findings, which are likely due to differences in data, methods, samples, and institutional settings. Taking a more general approach, we provide comparable evidence for four countries with different institutional settings – Australia, Germany, the UK, and the US – using a nonparametric bounds analysis. Relying on fairly weak and partially testable assumptions, our paper shows that unemployment has a significant negative effect on mental health in all countries. Our results rule out effects larger than a quarter of a standard deviation for Germany and half a standard deviation for the Anglo-Saxon countries. The effect is significant for both men and women and materialises already for short periods of unemployment. Public policy should hence focus on early prevention of mental health problems among the unemployed.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 10652.

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Length: 53 pages
Date of creation: Mar 2017
Publication status: forthcoming in: Health Economics
Handle: RePEc:iza:izadps:dp10652
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