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Online ISSN: 1099-176X    Print ISSN: 1091-4358
The Journal of Mental Health Policy and Economics
Volume 18, Issue 1, 2015. Pages: 27-37
Published Online: 1 March 2015

Copyright © 2015 ICMPE.


 

The Effects of Income on Mental Health: Evidence from the Social Security Notch

Ezra Golberstein

Ph.D., Assistant Professor, Division of Health Policy and Management, University of Minnesota School of Public Health, Minneapolis, MN, USA

* Correspondence to: Ezra Golberstein, Ph.D., Assistant Professor, Division of Health Policy and Management, University of Minnesota School of Public Health, 420 Delaware St. SE, MMC 729, Minneapolis, MN 55455, USA.
Tel.: +1-612-626 2572
Fax: +1-612-624 2196
E-mail: egolber@umn.edu

Source of Funding: The author received support from the Minnesota Population Center grant from the Eunice Kennedy Shriver National Institute for Child Health and Human Development (R24 HD041023).

Abstract

Mental health is a key component of overall wellbeing and mental disorders are relatively common, including among older adults. Yet the causal effect of income on mental health status among older adults is poorly understood. This paper considers the effects of a major source of transfer income, Social Security retirement benefits, on the mental health of older adults. We use the Social Security benefit “Notch,” a large, permanent, and exogenous shock to Social Security income in retirement, to identify the causal effect of Social Security income on mental health among older ages using data from the AHEAD cohort of the Health and Retirement Study. Increases in Social Security income significantly improve mental health status and the likelihood of a psychiatric diagnosis for women in lower-education households, but not for men. Public policy proposals that alter retirement benefits may have important effects on the mental health of older adults.

 

Background: Mental health is a key component of overall wellbeing and mental disorders are relatively common, including among older adults. Yet the causal effect of income on mental health status among older adults is poorly understood.

Aims: This paper considers the effects of a major source of transfer income, Social Security retirement benefits, on the mental health of older adults.

Methods: The Social Security benefit ``Notch'' is as a large, permanent, and exogenous shock to Social Security income in retirement. The ``Notch'' is used to identify the causal effect of Social Security income on mental health among older ages using data from the AHEAD cohort of the Health and Retirement Study.

Results: We find that increases in Social Security income significantly improve mental health status and the likelihood of a psychiatric diagnosis for women, but not for men.

Discussion: The effects of income on mental health for older women are statistically significant and meaningful in magnitude. While this is one of the only studies to use plausibly exogenous variation in household income to identify the effect of income on mental health, a limitation of this work is that the results only directly pertain to lower-education households.

Implications: Public policy proposals that alter retirement benefits for the elderly may have important effects on the mental health of older adults.

Received 19 August 2014; accepted 10 February 2015

Copyright 2015 ICMPE