Economic Conditions and Children's Mental Health

An expansive literature studies the effects of economic conditions on health outcomes but very few studies consider effects of economic conditions on child health.  Among children and adolescents, mental health outcomes have been shown to far exceed physical health outcomes as detriments to human capital accumulation and future labor market outcomes. We link two state and metropolitan statistical area-level measures of economic conditions (unemployment rates and housing price index data) to household data from the National Health Interview Surveys that include two measures of child and adolescent mental health status from 2001-2013. Within states and MSAs over time, child mental health status declines as economic conditions deteriorate, and these effects are both clinically and economically meaningful. This seems to be a “true” effect, rather than an artifact of depressed parents reporting greater child mental health symptoms. The results are insensitive to controlling for parental mental health, and children of parents in good mental health are more likely to have poor mental health in poor economic conditions. We also examine whether these effects are heterogeneous across different child and family characteristics, and we find that the effects of a bad economy on child mental health exist in nearly every subgroup that we examine. We investigate whether the effects of poor economic conditions are explained by job losses with the household, and find mixed evidence on whether the effects are fully mediated by household job loss or by other mechanisms. Finally, we examine the effects of economic conditions on a mental health services-related outcome: whether a child used special education services for an emotional or mental health problem. When economic conditions worsen, the probability of using this very intensive, expensive, and mostly publicly-financed service increases. This is the most comprehensive study to date on the effects of economic conditions on child and adolescent mental health. Our results suggest that poor economic conditions have significant negative effects on the mental health of a population that is largely outside of the labor market. The relative magnitudes of the effects are similar to or exceed the published magnitudes of many effects of economic conditions on adult health. These effects could lead to substantial internal and external costs.