Working Paper: NBER ID: w25584
Authors: Qing Hu; Ross Levine; Chen Lin; Mingzhu Tai
Abstract: In light of the human suffering and economic costs associated with mental illness, we provide the first assessment of whether local credit conditions shape the incidence of mental depression. Using several empirical strategies, we discover that bank regulatory reforms that improved local credit conditions reduced mental depression among low-income households and the impact was largest in counties dominated by bank-dependent firms. On the mechanisms, we find that the regulatory reforms boosted employment, income, and mental health among low-income individuals in bank-dependent counties, but the regulatory reforms did not increase borrowing by these individuals.
Keywords: Mental Health; Credit Conditions; Bank Deregulation; Low-Income Households
JEL Codes: D14; G21; I1; R23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Bank regulatory reforms (G28) | Reduction in mental depression among low-income households (I32) |
| Bank regulatory reforms (G28) | Boosted employment and income among low-income individuals (J68) |
| Boosted employment and income among low-income individuals (J68) | Positive impact on mental health (I14) |
| Increased interstate bank branch deregulation (G28) | Drop in composite depression index for low-income individuals (I32) |
| Increased interstate bank branch deregulation (G28) | Fall in clinical depression rates (I12) |
| Easing firm credit constraints (E51) | Enhances economic conditions that positively impact mental health (I15) |
| Deregulation did not lead to increased borrowing among individuals (G51) | No evidence supporting consumer credit channel (E51) |