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Older Americans, Depression, and Labor Market Outcomes

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Abstract

We examine the effect of depressive symptoms on the labor market outcomes of older Americans using the Health and Retirement Study (HRS). We take advantage of the longitudinal nature of the HRS from 1994 to 2008 and employ panel data methods to control for time-invariant, individual unobserved heterogeneity. Models that do not take into account individual heterogeneity show that depressive symptoms significantly reduce wages for males and females. In contrast, models that explicitly take into account individual heterogeneity through fixed effect estimation show no economic or statistically significant reduction in wages for those with depressive symptoms.

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Notes

  1. Models with dichotomous outcome variables are estimated via OLS because of the ease of interpretation.

  2. We also note the potential for reverse causality of depression in the wage equation. However, because of the potential for bias and inconsistency associated with weak instruments we investigated, we use OLS models and note that to the extent that lower wages may cause worse mental health, the population coefficient on depression should be less negative than indicated by our results [see Bound et al. 1995 for a general discussion of weak instruments and Chatterji et al. 2011 for a discussion in the specific context of mental health].

  3. Other control variables that were investigated include: shocks to self-reported health, divorce shocks, spouse death shocks, the presence of health insurance, a quadratic in age, and 5-year incremental age splines. The key results regarding the relationship between depressive symptoms and labor market outcomes are robust to the inclusion of these other control variables.

  4. One concern that may arise with fixed effects estimation is whether the insignificance of the fixed effects estimates is due to lack of variation in depressive symptoms across waves or because the fixed effect is controlling for time invariant attributes of the individual. The discussion surrounding Figure 1 suggests that there is individual level variation in depression over time. Furthermore, the standard errors in the fixed effect models are close to the same size as the OLS standard errors and are sometimes smaller. These two points suggest that the insignificance of depressive symptoms is attributable to individual specific factors.

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Authors and Affiliations

  1. Department of Economics, John B. Goddard School of Business & Economics, Weber State University, Ogden, 84408, UT, USA

    Brandon C Koford

  2. Department of Marketing and Economics, Langdale College of Business Administration, Valdosta State University, Valdosta, 31698, GA, USA

    Attila Cseh

Authors
  1. Brandon C Koford
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  2. Attila Cseh
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Appendix

Appendix

Table A1

Table A1 OLS wage equations for males and females
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Koford, B., Cseh, A. Older Americans, Depression, and Labor Market Outcomes. Eastern Econ J 41, 70–85 (2015). https://doi.org/10.1057/eej.2013.37

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