In December 2007, the U.S. entered into the Great Recession, the most significant economic downturn since the 1930s. Since then the U.S. has experienced record high rates of national unemployment, which reached a peak of 10.1 percent in October 2009. A large literature suggests that economic disruptions have more serious labor market consequences for some workers compared to others, and Charles and DeCicca (2008) find some evidence that the health of African American and less-educated males are more sensitive to business cycle fluctuations. We investigate whether rising state unemployment rates result in differential health effects by race and ethnicity using data from the Health and Retirement Study for the years 1996-2010, a period that includes the Great Recession. We examine a wide range of health outcomes to complement the findings in Charles and DeCicca (2008), including CESD score, whether the respondent reports feeling depressed, self reported health, smoking, and BMI. We also add to the existing literature by taking advantage of the panel nature of the HRS data and incorporating individual fixed effects, something that relatively few other studies have incorporated (see, e.g., Davalos and French, 2011, Davalos et al., 2011).       

            Preliminary results from pooled cross-sectional analysis suggest that blacks and Hispanics have worse health outcomes as unemployment rates increase; however, this effect diminishes when we include individual fixed effects. For example, in models without individual fixed effects, we find that a one percentage point increase in the unemployment rate results in a 0.7 percentage point increase in the likelihood a black respondent reports feeling depressed. However, in models with individual fixed effects this coefficient estimate falls to -0.002 and fails to achieve statistical significance. We find a similar pattern of results for Hispanic respondents and for several health outcomes. In contrast, we find no evidence that white or non-Hispanic respondents experience worse health as unemployment rates rise, either with or without individual fixed effects. This pattern of results is robust to excluding individuals who move across state lines between survey waves and to including several potentially endogenous controls.

      The results of our analysis of heterogeneous health effects of unemployment have important policy implications. For example, evidence that certain groups are harmed by changing macroeconomic conditions more than others will help policymakers target interventions to the most vulnerable. Similarly, understanding the association between the state unemployment rate and the individual’s unobserved propensity for worse health may also inform policy responses to economic downturns.

References

Charles, Kerwin Kofi and Philip DeCicca. 2008. “Local Labor Market Fluctuations and Health: Is There a Connection and for Whom?” Journal of Health Economics, 27(6): 1532-1550. 

Davalos, Maria E. and Michael T. French. 2011. “This Recession is Wearing Me Out! Health       Related Quality of Life and Economic Downturns.” The Journal of Mental Health              Quality and Economics, 14(2): 61-72.

Dávalos, María E., Hai Fang, and Michael T. French. 2012. “Easing the Pain of an Economic Downturn: Macroeconomic Conditions and Excessive Alcohol Consumption.” Health Economics, 21(11): 1318-1335.