Working Paper: CEPR ID: DP13099
Authors: Lidia Farre; Francesco Fasani; Hannes Felix Mueller
Abstract: This article documents a strong connection between unemployment and mentaldistress using data from the Spanish National Health Survey. We exploit thecollapse of the construction sector to identify the causal effect of joblosses in different segments of the Spanish labour market. Our resultssuggest that an increase of the unemployment rate by 10 percentage pointsdue to the breakdown in construction raised reported poor health and mentaldisorders in the affected population by 3 percentage points, respectively.We argue that the size of this effect responds to the fact that theconstruction sector was at the centre of the economic recession. As aresult, workers exposed to the negative labor demand shock faced very lowchances of re-entering employment. We show that this led to longunemployment spells, stress, hopelessness and feelings of uselessness. Theseeffects point towards a potential channel for unemployment hysteresis.
Keywords: Mental Health; Great Recession; Unemployment; Hysteresis
JEL Codes: I10; J60; C26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Unemployment (J64) | Poor Health and Mental Disorders (I12) |
| 10 percentage point increase in the unemployment rate (F66) | 3 percentage point increase in reported poor health and mental disorders (I14) |
| Collapse of the Construction Sector (L74) | Unemployment (J64) |
| Unemployment (J64) | Feelings of Stress, Hopelessness, and Uselessness (I31) |