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Mental Health, Human Capital and Labor Market Outcomes

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  • Cronin, C.J.; Forsstrom, M.P.; Papageorge, N.W.;

Abstract

There are two primary treatment alternatives available to those with mild to moderate depression or anxiety: psychotherapy and medication. The medical literature and our analysis suggests that in many cases psychotherapy, or a combination of therapy and medication, is more curative than medication alone. However, few individuals choose to use psychotherapy. We develop and estimate a dynamic model in which individuals make sequential medical treatment and labor supply decisions while jointly managing mental health and human capital. The results shed light on the relative importance of several drawbacks to psychotherapy that explain patients’ reluctance to use it: (1) therapy has high time costs, which vary with an individual’s opportunity cost of time and flexibility of the work schedule; (2) therapy is less standardized than medication, which results in uncertainty about its productivity for a given individual; and (3) therapy is expensive. The estimated model is used to simulate the impacts of counterfactual policies that alter the costs associated with psychotherapy.

Suggested Citation

  • Cronin, C.J.; Forsstrom, M.P.; Papageorge, N.W.;, 2017. "Mental Health, Human Capital and Labor Market Outcomes," Health, Econometrics and Data Group (HEDG) Working Papers 17/25, HEDG, c/o Department of Economics, University of York.
  • Handle: RePEc:yor:hectdg:17/25
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    File URL: https://www.york.ac.uk/media/economics/documents/hedg/workingpapers/1725.pdf
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    References listed on IDEAS

    as
    1. Donna B. Gilleskie, 1998. "A Dynamic Stochastic Model of Medical Care Use and Work Absence," Econometrica, Econometric Society, vol. 66(1), pages 1-46, January.
    2. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
    3. David M. Blau & Donna B. Gilleskie, 2008. "The Role Of Retiree Health Insurance In The Employment Behavior Of Older Men," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(2), pages 475-514, May.
    4. Jason M. Fletcher, 2008. "Adolescent depression: diagnosis, treatment, and educational attainment," Health Economics, John Wiley & Sons, Ltd., vol. 17(11), pages 1215-1235.
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    More about this item

    Keywords

    Mental Health; Demand for Medical Care; Labor Supply; Structural Models;

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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