Unemployment Compensation, Monetary Policy, and Suicide

Abstract

[Objective]The purpose of this empirical paper is to explore how differences in fiscal and monetary policies affect health, particularly suicide. To date, studies using US data indicate the significant effects of unemployment on health, while at least some research using non-US data suggests little or no effect (e.g., Browning et al. (2006) and Bockerman et al. (2007) with Danish and Finnish data, respectively). One possible source of these varying impacts may lie in differences in fiscal and monetary policies across countries leading to variation in the level of social protection and the value of the nominal stock of debt. Although most extant studies predominantly focus on the association between unemployment and health, a few studies have investigated the association between fiscal and monetary policies and health. [Data and Method]The data used are from all OECD countries from 1980 to 2005. Models of the natural log of the suicide rate per 100,000 persons are estimated using population-weighted least squares by gender and age. The key independent variables are two fiscal policy variables (real expenditure on unemployment compensation policy and health policy per capita) and one monetary policy variable (the money market rate). The regression also includes the unemployment rate and real GDP per capita and its rate of growth. The model controls for unobserved country fixed-effects, time-specific effects and country-specific time trends. [Results]The major finding is that fiscal and monetary policy has significant effects on the rate of suicide. We find these effects vary according to the types of policies and the different phases of the individual’s lifecycle. Similar patterns exist for men and women. There is a significant protective effect of expenditure on unemployment compensation on suicide, particularly for persons aged from 20 to 44 years, but we find no significant effect for persons older than 45 years. An increase in the money market rate (implying tighter monetary policy) increases the rate of suicide for persons less than 54 years of age, but there is no significant effect for those older than 55 years. The other main findings are that macroeconomic conditions (as proxied by the unemployment rate) affect the suicide rate differently depending on the person’s age. For instance, an increase in the unemployment rate increases the rate of suicide for those in their 20s and aged more than 40, but decreases the rate for those in their 30s. Finally, the effects of economic expansion on suicide persist over time, while the effects of the policies examined disappear, mostly within a year. [Conclusions]From a policy perspective, we need to take into account the effects of public policy on health when analyzing the relationship between unemployment and health.

Keywords: Monetary policy, Suicide, Unemployment compensation policy