Working Paper: NBER ID: w22973
Authors: Jonathan De Quidt; Johannes Haushofer
Abstract: Major depressive disorder (MDD) is one of the most prevalent mental illnesses worldwide. Existing evidence suggests that it has both economic causes and consequences, such as unemployment. However, depression has not received significant attention in the economics literature. In this paper, we present a simple model which predicts the core symptoms of depression from economic primitives, i.e. beliefs. Specifically, we show that when exogenous shocks cause an agent to have pessimistic beliefs about the returns to her effort, this agent will exhibit depressive symptoms such undereating or overeating, insomnia or hypersomnia, and a decrease in labor supply. When these effects are strong enough, they can generate a poverty trap. We present descriptive evidence that illustrates the predicted relationships.
Keywords: Depression; Economic Causes; Mental Health
JEL Codes: D03; I1; I15; I3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| exogenous negative outcomes (such as unemployment or business closures) (F69) | pessimistic beliefs about the returns to labor effort (J24) |
| pessimistic beliefs about the returns to labor effort (J24) | depressive symptoms (D91) |
| pessimistic beliefs about the returns to labor effort (J24) | decreased labor supply (J20) |
| pessimistic beliefs about the returns to labor effort (J24) | altered eating and sleeping patterns (I12) |
| pessimistic beliefs about the returns to labor effort (J24) | decreased overall utility (D11) |
| decreased labor supply (J20) | poverty trap (I32) |
| decreased labor supply (J20) | lack of learning about returns to effort (I26) |
| lack of learning about returns to effort (I26) | perpetuating depressive symptoms (E71) |