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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 of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4883
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    Citations

    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. repec:zbw:rwirep:0378 is not listed on IDEAS
    2. Scholten, Lincy & Betkó, János & Gesthuizen, Maurice & Fransen-Kuppens, Gerdine & de Vet, Renée & Wolf, Judith, 2023. "Reciprocal relations between financial hardship, sense of societal belonging and mental health for social assistance recipients," Social Science & Medicine, Elsevier, vol. 321(C).
    3. 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.
    4. Vincent Vandenberghe, 2021. "Work beyond the age of 50. What role for mental versus physical health?," LABOUR, CEIS, vol. 35(3), pages 311-347, September.
    5. Israel Escudero-Castillo & Fco. Javier Mato-Díaz & Ana Rodriguez-Alvarez, 2021. "Furloughs, Teleworking and Other Work Situations during the COVID-19 Lockdown: Impact on Mental Well-Being," IJERPH, MDPI, vol. 18(6), pages 1-16, March.
    6. Meng, Xin & Xue, Sen, 2017. "Social Networks and Mental Health Problems: Evidence from Rural-to-Urban Migrants in China," IZA Discussion Papers 10481, Institute of Labor Economics (IZA).
    7. Souvik Banerjee & Pinka Chatterji & Kajal Lahiri, 2017. "Effects of Psychiatric Disorders on Labor Market Outcomes: A Latent Variable Approach Using Multiple Clinical Indicators," Health Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 184-205, February.
    8. Ruiz-Tagle, Jaime & Urria, Ignacio, 2022. "Household overcrowding trajectories and mental well-being," Social Science & Medicine, Elsevier, vol. 296(C).
    9. Björn Nilsson, 2017. "Parental depressive symptoms and the child labor-schooling nexus: evidence from Mexico," Working Papers DT/2017/06, DIAL (Développement, Institutions et Mondialisation).
    10. Sabia, Joseph J. & Nguyen, Thanh Tam, 2016. "The Effect of Medical Marijuana Laws on Labor Market Outcomes," IZA Discussion Papers 9831, Institute of Labor Economics (IZA).
    11. 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.
    12. 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.
    13. 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.
    14. Maren M. Michaelsen, 2012. "Mental Health and Labour Supply – Evidence from Mexico‘s Ongoing Violent Conflicts," Ruhr Economic Papers 0378, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    15. Xin Meng & Sen Xue, 2020. "Social networks and mental health outcomes: Chinese rural–urban migrant experience," Journal of Population Economics, Springer;European Society for Population Economics, vol. 33(1), pages 155-195, January.
    16. 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.
    17. Vandenberghe, Vincent, 2021. "Work Beyond the Age of 50. What Role for Mental v.s. Physical Health?," GLO Discussion Paper Series 796, Global Labor Organization (GLO).
    18. Nancy Reichman & Hope Corman & Kelly Noonan, 2015. "Effects of maternal depression on couple relationship status," Review of Economics of the Household, Springer, vol. 13(4), pages 929-973, December.
    19. Vincent Vandenberghe, 2020. "The Rather Limited Role Of Mental Ill Health In Driving Work Beyond 50," LIDAM Discussion Papers IRES 2020020, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    20. Maren M. Michaelsen, 2012. "Mental Health and Labour Supply: Evidence from Mexico�s Ongoing Violent Conflicts," HiCN Working Papers 117, Households in Conflict Network.
    21. Wouter Zwysen, 2015. "The effects of father’s worklessness on young adults in the UK," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-15, December.
    22. Isabel Ruiz & Carlos Vargas-Silva, 2018. "Differences in labour market outcomes between natives, refugees and other migrants in the UK," Journal of Economic Geography, Oxford University Press, vol. 18(4), pages 855-885.
    23. Li Deng & Xiaohua Hou & Haiyang Lu & Xuefeng Li, 2023. "The Impact of Migration Experience on Rural Residents’ Mental Health: Evidence from Rural China," IJERPH, MDPI, vol. 20(3), pages 1-17, January.
    24. 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.
    25. Michaelsen, Maren M., 2012. "Mental Health and Labour Supply – Evidence from Mexico's Ongoing Violent Conflicts," Ruhr Economic Papers 378, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

    More about this item

    Keywords

    measurement error; mental health; labour market participation; causality;
    All these keywords.

    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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