The impact of labour market shocks on mental health: evidence from the Covid‐19 first wave

Abstract

In this study, we estimate the effect of a negative labour market shock on individu- als’ levels of stress, anxiety, and depression. We use a dataset collected during the first wave of the Covid-19 pandemic, on a representative sample of citizens from Italy, Spain, and the United Kingdom, interviewed on three occasions. We meas- ure stress, anxiety and depression and labour shocks using validated scales. Our research design is a standard difference-in-differences model: we leverage the differ- ential timing of shocks to identify the impact on mental health. In our estimations, a negative labour shock increases the measure of stress, anxiety, and depression by 16% of a standard deviation computed from the baseline.