The causal effect of depression and anxiety on life satisfaction [electronic resource] : an instrumental variable approach / Arnar Buason, Edward C. Norton, Paul McNamee, Edda Bjork Thordardottir, Tinna Laufey Asgeirsdottir.

Cambridge, Massachusetts : National Bureau of Economic Research, 2021.©2021

Buason, Arnar. author.

National Bureau of Economic Research. issuing body.

01-01-2021

1 online resource.

text

online resource

NBER working paper series ; no. w28575

Working paper series (National Bureau of Economic Research) ; no. w28575.

WEB (Copy 1) INTERNET 1319442-1001 ONLINE

Open item 

Quality of life

Household, Income and Labour Dynamics in Australia (HILDA) Survey

Anxiety

Depression

Overseas item

"March 2021"

Includes bibliographical references.

Within the vast body of literature on the relationship between mental disorders and life satisfaction, no satisfactory treatment has been proposed to deal with the bi-directional relationship between the two. We estimate the causal effect of depression and anxiety on life satisfaction by applying an instrumental-variable regression approach to the Household, Income and Labour Dynamics in Australia (HILDA) survey. Our identification strategy exploits regional variation in the tendency to diagnose depression and anxiety, while also using an individual-level panel-data method. Our results show that previous research seriously overestimates the effect of depression and anxiety on life satisfaction. The most comparable estimate from previous research is over five times the size of our estimate. Furthermore, those papers that use such estimates to measure the monetary value of not suffering from depression or anxiety find it to be between $14 to $600 million a year per individual, compared to our estimate of around $60 thousand. Another source of bias which further inflates previous monetary estimates is the endogeneity of income. We account for this issue by using irregular sources of income, such as lottery winnings, instead of regular household income.

1319442

1319442-1001

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