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Feeling Useless: The Effect of Unemployment on Mental Health in the Great Recession

Author

Listed:
  • Farré, Lídia

    (University of Barcelona)

  • Fasani, Francesco

    (University of Milan)

  • Mueller, Hannes

    (IAE Barcelona (CSIC))

Abstract

This article documents a strong connection between unemployment and mental disorders using data from the Spanish Health Survey. We exploit the collapse of the construction sector to identify the causal effect of job loss. Our results suggest that an increase of the unemployment rate by 10 percent due to collapse of the sector raised mental disorders in the affected population by 3 percent. We argue that the large size of this effect responds to the fact that the construction sector was at the centre of the macroeconomic shock. As a result, workers exposed to the negative employment shock faced very low chances of re-entering employment. We show that this led to long unemployment spells, hopelessness and feelings of uselessness.

Suggested Citation

  • Farré, Lídia & Fasani, Francesco & Mueller, Hannes, 2015. "Feeling Useless: The Effect of Unemployment on Mental Health in the Great Recession," IZA Discussion Papers 9235, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp9235
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    More about this item

    Keywords

    mental health; great recession; unemployment; Spain;
    All these keywords.

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

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