Financial crises inflict significant human as well as economic hardship. This paper focuses on the human fallout of capital market stress. Financial stress-induced behavioral changes can manifest in higher suicide and murder-suicide rates. We find that these rates also correlate with the Gross Domestic Product (GDP) growth rate (negatively associated; a -0.25% drop [in the rate of change in annual suicides for a 1% change in the independent variable]), unemployment rate (positive link; 0.298% increase), inflation rate (positive link; 0.169% increase in suicide rate levels) and stock market returns adjusted for the risk-free T-Bill rate (negative link; -0.047% drop). Suicides tend to rise during periods of economic turmoil, such as the recent Great Recession of 2008. An analysis of Centers for Disease Control and Prevention (CDC) data of more than 2 million non-natural deaths in the US since 1980 reveals a positive correlation with unemployment levels. We find that suicides and murder-suicides associated with adverse market sentiment lag the initial stressor by up to two years, thus opening a policy window for government/public health intervention to reduce these negative outcomes. Both our models explain about 73 to 76% of the variance in suicide rates and rate of change in suicide rates, and deploy a total of four widely available independent variables (lagged and/or transformed). The results are invariant to the inclusion/exclusion of 2008 data over the 1980-2016 time series, the period of our study. The disconnect between rational decision making, induced by cognitive dissonance and severe financial stress can lead to sub optimal outcomes, not only in the area of investing, but in a direct loss of human capital. No economic system can afford such losses. Finance journal articles focus on monetary alpha, which is the return on a portfolio in excess of the benchmark; we think it is important to be aware of the loss of human capital as a consequence of market instability. This study makes one such an attempt.
A new round has opened in the debate over whether recessions are good or bad for public health. Some researchers have found that death rates fall during recessions. But a new study argues such findings may be distorted by migration, as people move away from places that have fallen on hard times and flock to places with booming economies.
This analysis summarizes prior research and uses national, state and county level data from the United States from 1976-2013 to examine whether the mortality effects of economic crises differ in kind from those of the more typical fluctuations. The tentative conclusion is that economic crises affect mortality rates (and presumably other measures of health) in the same way as less severe downturns: namely, they lead to improvements in physical health. The effects of severe national recessions in the United States, appear to have a beneficial effect on mortality that is roughly twice as strong as that predicted due to the elevated unemployment rates alone while the higher predicted rate of suicides during typical periods of economic weakness is approximately offset during severe recessions. No consistent pattern is obtained for more localized economic crises occurring at the state level – some estimates suggest larger protective mortality effects while others indicate offsetting deleterious consequences.
Estimating the Recession-Mortality Relationship When Migration Matters by Vellore Arthi, Brian Beach, William Walker Hanlon :: SSRNJune 24, 2017
A large literature following Ruhm (2000) suggests that mortality falls during recessions and rises during booms. The panel-data approach used to generate these results assumes that either there is no substantial migration response to temporary changes in local economic conditions, or that any such response is accurately captured by intercensal population estimates. To assess the importance of these assumptions, we examine two natural experiments: the recession in cotton textile-producing districts of Britain during the U.S. Civil War, and the coal boom in Appalachian counties of the U.S. that followed the OPEC oil embargo in the 1970s. In both settings, we find evidence of a substantial migratory response. Moreover, we show that estimates of the relationship between business cycles and mortality are highly sensitive to assumptions related to migration. After adjusting for migration, we find that mortality increased during the cotton recession, but was largely unaffected by the coal boom. Overall, our results suggest that migration can meaningfully bias estimates of the impact of business-cycle fluctuations on mortality.
Do More of Those in Misery Suffer from Poverty, Unemployment or Mental Illness? by Sarah Flèche, Richard Layard :: SSRNFebruary 3, 2017
Studies of deprivation usually ignore mental illness. This paper uses household panel data from the USA, Australia, Britain and Germany to broaden the analysis. We ask first how many of those in the lowest levels of life‐satisfaction suffer from unemployment, poverty, physical ill health, and mental illness. The largest proportion suffers from mental illness. Multiple regression shows that mental illness is not highly correlated with poverty or unemployment, and that it contributes more to explaining the presence of misery than is explained by either poverty or unemployment. This holds both with and without fixed effects.
The Dynamic Effects of Health on the Employment of Older Workers by Richard W. Blundell, Jack Britton, Monica Costa Dias, Eric French :: SSRNDecember 13, 2016
Using data from the Health and Retirement Study (HRS) and the English Longitudinal Study of Ageing (ELSA), we estimate a dynamic model of health and employment. We estimate how transitory and persistent health shocks affect employment over time. In a first step, we formulate and estimate a dynamic model of health. The procedure accounts for measurement error and the possibility that people might justify their employment status by reporting bad health. We find that health is well represented by the sum of a transitory white noise process and a persistent AR(1) process. Next, we use the method of simulated moments to estimate the employment response to these shocks. We find that persistent shocks have much bigger effects on employment than transitory shocks, and that these persistent shocks are long lived. For this reason employment is strongly correlated with lagged health, a fact that the usual cross-sectional estimates do not account for. We also show that accounting for the dynamics of health and employment leads to larger estimates of health’s effects on employment than what simple OLS estimates of health on employment would imply. We argue that the dynamic effect of health on employment could be generated by a model with human capital accumulation, where negative health shocks slowly reduce the human capital stock, and thus, gradually cause people to exit the labor market.
Does a Mandatory Reduction of Standard Working Hours Improve Employees’ Health Status? by Rafael Sánchez :: SSRNDecember 9, 2016
Most of the empirical evidence regarding the impact of reductions of standard working hours analyzes its effects on employment outcomes, family life balance, and social networks, but there is no empirical evidence of its effects on health outcomes. This study uses panel data for France and Portugal and exploits the exogenous variation of working hours coming from labor regulation and estimates its impact on health outcomes (from 39 to 35 hours a week and from 44 to 40 hours a week, respectively). Results suggest that the mandatory reduction of standard working hours decreased the working hours of treated individuals (and not the hours of individuals in the control group). Results also suggest that the fact of being treated generated a negative (positive) effect on young males’ (females’) health in France. No effects on health outcomes were found for Portugal.