The Effect of Changing Mental Health on Unemployment Duration and Destination States after Unemployment
45 Pages Posted: 5 Sep 2010
Date Written: July 13, 2010
Abstract
There is a large literature showing that unemployment has a negative effect on mental health, but little evidence exists on how mental illness affects the unemployeds’ chances of re-employment or the risk of labour market exit. We study how purchase of pharmaceutical products for severe mental illnesses during unemployment affects re- employment and labour market exit probabilities. Within the framework of a multivariate duration model we apply the ‘timing-of-events’ method, which explicitly makes use of the information that pharmaceutical treatment can begin at different points of time during an unemployment spell. In the absence of instrumental variables this method allows for causal inference in presence of unobserved heterogeneity, but at the cost of strong assumptions. The basis for our analysis is state-of-the-art register-based data, which gives insight on the timing, type, and volume of drug purchase as well as labour market histories for a random sample of the Danish population. We find a significant and strong negative effect of periods with drug treatment on the employment chances. During the treatment with drugs, the job-finding rate is reduced substantially relative to what it would have been in absence of a drug treated mental illness. Importantly, our results not only show that drug treated mental illness prolongs the unemployment duration, but it also increases the labour market exit rate.
Keywords: Unemployment, Mental Health, Duration Model, Administrative Register Data
JEL Classification: I10, J64
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Unemployment and Self-Assessed Health: Evidence from Panel Data
By Petri Bockerman and Pekka Ilmakunnas
-
Does Job Loss Cause Ill Health?
By Martin Salm
-
Elusive Effects of Unemployment on Happiness
By Petri Bockerman and Pekka Ilmakunnas