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

Author

Listed:
  • Frijters, Paul

    () (London School of Economics)

  • 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.

Suggested Citation

  • Frijters, Paul & Johnston, David W. & Shields, Michael A., 2010. "Mental Health and Labour Market Participation: Evidence from IV Panel Data Models," IZA Discussion Papers 4883, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4883
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Mental Health and Labour Market Participation
      by Liam Delaney in Geary Behaviour Centre on 2010-08-11 02:58:00

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    Cited by:

    1. Baert, Stijn & De Visschere, Sarah & Schoors, Koen & Vandenberghe, Désirée & Omey, Eddy, 2016. "First depressed, then discriminated against?," Social Science & Medicine, Elsevier, vol. 170(C), pages 247-254.
    2. Trevisan, Elisabetta & Zantomio, Francesca, 2016. "The impact of acute health shocks on the labour supply of older workers: Evidence from sixteen European countries," Labour Economics, Elsevier, vol. 43(C), pages 171-185.
    3. Maren M. Michaelsen, 2012. "Mental Health and Labour Supply: Evidence from Mexico’s Ongoing Violent Conflicts," HiCN Working Papers 117, Households in Conflict Network.
    4. Francesca Cornaglia & Naomi E. Feldman & Andrew Leigh, 2014. "Crime and Mental Well-Being," Journal of Human Resources, University of Wisconsin Press, vol. 49(1), pages 110-140.
    5. Meng, Xin & Xue, Sen, 2017. "Social Networks and Mental Health Problems: Evidence from Rural-to-Urban Migrants in China," IZA Discussion Papers 10481, Institute for the Study of Labor (IZA).
    6. Ana María Iregui-Bohórquez & Ligia Alba Melo-Becerra & María Teresa Ramírez-Giraldo, 2016. "Health status and labor force participation: evidence for urban low and middle income individuals in Colombia," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 15(1), pages 33-55, April.
    7. Kelly Noonan & Hope Corman & Nancy E. Reichman, 2014. "Effects of Maternal Depression on Family Food Insecurity," NBER Working Papers 20113, National Bureau of Economic Research, Inc.
    8. Zwysen, Wouter, 2013. "Where you go depends on where you come from: the influence of father’s employment status on young adult’s labour market experiences," ISER Working Paper Series 2013-24, Institute for Social and Economic Research.

    More about this item

    Keywords

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

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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