WAS THE GREAT RECESSION A SHOCK TO HEALTH? The Effect of Severe Macroeconomic Stress on Health Outcomes and Behaviors

Abstract

As the largest economic downturn of the post-war period, the Great Recession of 2007-2009 marked a turning point in American economic history. Understanding the full consequences of Great Recession requires scrutinizing the effects of the crisis beyond its direct economic impact. This thesis investigates whether the Great Recession was not only a shock to the macroeconomy but also a shock to health. By using variation in statelevel unemployment rates to model economic decline, this paper investigates the effect of severe macroeconomic stress on individual health outcomes and behaviors. Isolating years of “pre-crisis” and “recession,” this paper employs the 2005 and 2009 waves of the Panel Study of Income Dynamics (PSID) in a two-wave individual fixed-effects approach. It is the first to use longitudinal data from a nationally representative, mixed gender sample to study the effect of the macroeconomic variation during the Great Recession on a wide array of health outcomes and behaviors. Its findings help illuminate the effects of the Great Recession on population health and suggest a role for health promotion policies during future economic crises. This investigation finds considerable evidence that the Great Recession induced a negative shock to health. Rising unemployment rates significantly predict poorer health outcomes, including a lower probability of strong self-rated health status and higher probabilities of mental conditions and physical and neurological work-limiting conditions. Individual responses to the recession also were insufficient to counter rising obesity. One exception to this pattern of worse recessionary health arises: hospitalizations significantly decline with the economy. This thesis finds less evidence that the crisis produced a major shift in health behaviors. Declines in smoking countered the trend of worsening health outcomes but may reflect ongoing declines in smoking prevalence. Results suggest no apparent link between the macroeconomy and drinking behaviors or physical activity. As an extension, this paper also explores the degree to which three classic microeconomic channels – changes in income, hours worked, and employment status – are the underlying mechanisms that caused recessionary health changes. The ability of these pathways to account for individual health responses to macroeconomic stress is limited in this analysis. Income, hours worked and employment status emerge as influential mediators for some outcomes, such as declines in mental health. For others, most notably self-rated health and hospitalization, they fail to provide the key linkage between the macroeconomy and health. Results suggest that research and policy imperatives exist to further investigate the scope, duration, and mediators of recessionary health shocks.