The Labor Market Effects of Mental Illness: The Case of Affective Disorders

Abstract

Objective: In this research we use data from the National Comorbidity Survey to examine the effects of affective mental disorders on the income and employment of women and men. We consider separately the effects of three major categories of affective illness: depression, bi-polar illnesses, and dysthymia.

Methods: We use a two-stage instrumental variables procedure to estimate the labor market effects of affective disorders in the presence of unmeasured heterogeneity between those with and without illness. In the first stage, we draw on respondents' family histories with illness to construct instrumental variables, which are theoretically and empirically relevant. These instruments are used in second stage regression and logistic analyses of annual income and employment.

Results: We find that some affective disorders result in earnings losses for both women and men. For women, depression is associated with substantial earnings losses for working women, on the order of more than $6,000 per year. But these losses are mitigated over time. Moreover, we find that depression has substantial negative employment effects for women. For men, we find evidence of income losses associated with dysthymia, but we find no evidence of significant employment effects.

JEL Classification: E24, I12, J10, J11