Uncovering the Pathways Linking Local Economic Conditions, Occupation, and Health

Abstract

This paper uses ten years of data from the PSID to examine the effects of economic conditions on health status. We expand on current research in this area by focusing on local (county) rather than aggregate (state/nation) conditions, using a panel data set, and examining a pre-mortality outcome (self-reported health status). In contrast with much of the previous literature, we find evidence that self-reported health status is procyclical. Generally the results suggest a reduction in health from each point increase in the unemployment rate that is equivalent to aging between 1-2 years. The results suggest that local measures are preferable and lead to somewhat larger estimates. We then present evidence that these effects are primarily psychologically driven, which is consistent with literature on the effects of macro conditions on mental health and also has implications for using self-reported health status as a measure of physical health.