Scandinavian Working Papers in Economics

EfD Discussion Paper,
Environment for Development, University of Gothenburg

No 22-1: Shocks and Mental Health: Panel Data Evidence from South Africa

Yonas Alem () and Gidisa Lachisa Tato ()
Additional contact information
Yonas Alem: Department of Economics, School of Business, Economics and Law; University of Gothenburg
Gidisa Lachisa Tato: University of Gothenburg and Addis Ababa University

Abstract: Households in developing countries are subject to considerable risk and shocks, but most don’t have the ability to deal with them using formal mechanisms. We use five rounds of South African NIDS panel data and in-vestigate the impact of shocks on mental health of individuals. We find that experiencing idiosyncratic shocks, such as death of a supportive family member and loss of assets, has significant negative impacts on mental health. Dynamic System GMM regression results suggest that one of the key pathways by which the death of a family member affects mental health is through reduction of household income. Our results suggest that there is a large scope for improving welfare further through social support and insurance mechanisms. The results also call for expansion of psychiatric and therapeutic care in Africa, which currently appears to be at the lowest level compared to the rest of the world.

Keywords: Mental Health; CES-D Score; Shocks; Panel Data

JEL-codes: I12; I15; O15

Language: English

27 pages, March 1, 2022

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