Coen van de Kraats (VU University Amsterdam)
Mental Health Disparities by Socioeconomic Status over the Life Cycle
Mental health problems are widespread among the general population: at any point in time 15-20% of the working age population is affected by a common mental health problem, such as anxiety or depression (OECD, 2014). The need to alleviate the (economic) burden of mental ill-health requires a proper understanding of how mental health problems are distributed across the population. This paper (i) empirically investigates differences in the life cycle mental health developments across various dimensions of socioeconomic status (SES, e.g. wealth, income, education, occupation an labor market status) and (ii) develops and economic theory of mental health that can lead to new testable predictions regarding health disparities.
The first part of the paper presents stylized facts on the empirical life cycle trajectories of mental health using longitudinal data from the Netherlands. On average mental health scores slightly improve over working life and mental health scores are higher for those with higher income. The data do not indicate significant differences in mental health developments across work types (e.g. no significant differences in mental health developments between manual and non-manual jobs exist). A clear U-shaped development exists for mental health scores for individuals who are out of the labor market, regardless of income level. This U-shape contrasts sharply with the relatively stable mental health scores of individuals with jobs.
The second part aims to incorporate the empirical findings in a comprehensive theoretical framework. We present a conceptualization of mental health as a form of capital to develop a theory of mental health based on the Grossman (1972) framework. Here, ‘mental health behavior’ consists of an individual’s decisions to (i) invest in mental health and (ii) accept job-related psychosocial stress, which yields a wage premium but negatively affects mental health. This framework is deployed to reflect on the empirical findings and raises new questions such as whether job-related psychosocial stress is compensated differently across skill levels. (joint with Maarten Lindeboom en Titus Galama)
Discussant: Silvia Garcia Mandico
Oana Furtuna (University of Amsterdam)
Searching for the Confidence Fairy: Evidence from Announcements of Fiscal Austerity Measures
Using a newly constructed dataset of announcements of fiscal consolidations, we explore the role of the expectations channel in shaping the effect of those announcements on macroeconomic aggregates. We find no convincing evidence that either consumer sentiment or long-term interest rates act as `confidence fairies’ during episodes of fiscal austerity. However, the responses of both variables strongly depend on the composition of the announced consolidation. Announcements of government spending cuts have little effect on sentiment, while announcements of revenue-based consolidations depress it. Counterfactual experiments show that the combined effect of the responses of consumer confidence and interest rates amplify the negative real effect of revenue -based austerity measures. (Joint with Roel Beetsma and Massimo Giuliodori)
Discussant: Coen van de Kraats
Ieva Sakalauskaite (University of Amsterdam)
Bank Risk-Taking and Misconduct
I collect data on misconduct in major financial institutions to show that it varies over the business cycle. While asset quality misrepresentations increase in booms, it seems that misconduct that abuses retail customers increases when the cycle starts slowing down. I also show that the effects differ in banks with different sensitivity to business cycle conditions, as measured by their market beta’s. I propose a model that attributes changes in bank misconduct over the cycle to agency conflicts within banks. As the risks in implementing investment projects increase, banks resort to myopic managers who are not only more willing to supervise risky projects, but are also more likely to engage in misconduct. The paper adds to the empirical literature on misconduct in corporations and provides an alternative approach to modelling it.