Article Abstract

Article Abstract

Online ISSN: 1099-176X Print ISSN: 1091-4358
The Journal of Mental Health Policy and Economics
Volume 18, Issue 3, 2015. Pages: 137-145
Published Online: 1 September 2015

Impact of Mental Disorders on Employment and Receipt of Public Assistance: An Instrumental Variables Approach

Nilay Kafali,¹* Benjamin Cook,² Shuai Wang,³ Pilar Garcia Martinez,⁴ Zach Selke,⁵ Carlos Blanco⁶

¹PhD, RTI International, Research Economist, Waltham, MA, USA
²PhD, Center for Multicultural Mental Health Research, Harvard Medical School-Cambridge Health Alliance, Somerville, MA, USA
³PhD, Department of Psychiatry, New York State Psychiatric Institute/Columbia University, New York, NY, USA
⁴PhD, Universidad de Salamanca, Spain
⁵BA, Center for Multicultural Mental Health Research, Harvard Medical School-Cambridge Health Alliance, Somerville, MA, USA
⁶MD, PhD, Department of Psychiatry, New York State Psychiatric Institute/Columbia University, New York, NY, USA

* Correspondence to: Nilay Kafali, PhD, Research Economist, RTI International, 1440 Main Street, Suite 310, Waltham, MA 02451, USA.
Tel: +1-607-3514499
E-mail:ekafali@rti.org

Source of Funding: None declared.

Abstract

Unlike other disorders, much of the economic burden of mental disorders is due to indirect costs such as loss of employment and the receipt of public assistance. The goal of this paper is to estimate how having a mental disorder impacts employment and receipt of public assistance using instrumental variable methods. Having a mental disorder is instrumented by whether the individual has any close family members with alcohol, drug or behavioral problems. Results show that having any mental disorders is associated with a significant reduction in the probability of being employed by 0.09, and in the probability of being employed full-time by 0.10. Having any mental disorders is associated with a significant increase in the probability of receiving public assistance and food assistance by 0.10 and 0.15, respectively. We find that the true impact of having a mental disorder is underestimated by standard models that do not control for endogeneity.

Background: Unlike other disorders, much of the economic burden of mental disorders is not due to direct costs of care, but due to indirect costs such as loss of employment and the receipt of public assistance.

Aims: The goal of this paper is to estimate how having a mental disorder impacts employment outcomes, receipt of public assistance and food assistance.

Methods: We estimate the impact of having a mental disorder on employment and the receipt of public assistance using instrumental variable (IV) methods and a longitudinal dataset: National Epidemiologic Survey on Alcohol and Related Conditions. Having a mental disorder is instrumented by whether the individual has any close family members with a history of alcohol, drug or behavioral disorders. We use bivariate probit models that control for individual socio-demographic characteristics and health status variables.

Results: Results show that having any mental disorders is associated with a significant reduction in the probability of being employed by 0.09 (or 9 percentage points), and in the probability of being employed full-time by 0.10. For public assistance outcomes, having any mental disorders is associated with a significant increase in the probability of receiving public assistance and food assistance by 0.10 and 0.15, respectively. These estimated marginal effects using instrumental variable methods are greater than the standard probit model estimates for all outcomes, implying that the true impact of having a mental disorder is underestimated by standard models that do not employ an identifying strategy that controls for endogeneity.

Discussion: The relatively large marginal effects on employment and public assistance suggest that effective diagnosis and treatment of individuals with mental disorders in the workforce can have a significant impact on productivity and public assistance programs.

Received 3 August 2014; accepted 2 July 2015