Economic downturns and mental health in Germany

Daniel Avdic, Sonja C. de New, Daniel A. Kamhöfer

Research output: Contribution to journalArticleResearchpeer-review

10 Citations (Scopus)

Abstract

We study the impact of the macroeconomic environment on mental health in Germany. Endogeneity concerns are tackled using a shift-share instrumental variables approach in which exposure to macroeconomic fluctuations is estimated from regional variations in historical industry sector composition. Estimation results reveal strong procyclical effects on the 12-item short form survey's mental health component summary score. These results are supported by corresponding estimates for self-assessed life satisfaction and objective mental health-related hospitalizations. Effects mainly operate through worries about future job loss and income reductions, while actual unemployment and income effects are small. An event study of the impact of the Great Recession reveals that adverse effects on mental health are persistent and remained even after the economy recovered.

Original languageEnglish
Article number103915
Number of pages21
JournalEuropean Economic Review
Volume140
DOIs
Publication statusPublished - Nov 2021

Keywords

  • Business cycle
  • Great Recession
  • Mental health
  • Shift-share instrument
  • Well-being

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