Mental Health, Human Capital and Labor.pdf

Mental Health, Human Capital and Labor.pdf - Mental Health...

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Mental Health, Human Capital and Labor Market Outcomes * Christopher J. Cronin Department of Economics, University of Notre Dame Matthew P. Forsstrom Department of Economics, University of North Carolina - Chapel Hill Nicholas W. Papageorge § Department of Economics, Johns Hopkins University and IZA April 30, 2017 This draft was submitted for presentation at SOLE 2017 and is intended for conference participants only. Please do not circulate, disseminate, or cite without express permission from the corresponding author. Abstract: There are two primary treatment alternatives available to those with mild to moderate depression or anxiety: psychotherapy and medication. The medical literature and our analysis suggests that in many cases psychotherapy, or a combination of therapy and medication, is more curative than medication alone. However, few individuals choose to use psychotherapy. We develop and estimate a dynamic model in which individuals make sequential medical treatment and labor supply decisions while jointly managing mental health and human capital. The results shed light on the relative importance of several drawbacks to psychotherapy that explain patients’ reluctance to use it: (1) therapy has high time costs, which vary with an individual’s opportunity cost of time and flexibility of the work schedule; (2) therapy is less standardized than medication, which results in uncertainty about it’s productivity for a given individual; and (3) therapy is expensive. The estimated model is used to simulate the impacts of counterfactual policies that alter the costs associated with psychotherapy. Keywords : Mental Health, Demand for Medical Care, Labor Supply, Structural Models. JEL Classification: I10, I12, J22, J24 * First draft: October 31, 2016. We gratefully acknowledge helpful comments from: Bill Evans, David Bradford, Michael Dickstein, Michael Richards, Richard Frank and Robert Moffitt along with seminar par- ticipants at ASHEcon Philadelphia and the Southeastern Health Economic Study Group Conference. [email protected] . [email protected] . § [Corresponding author] [email protected] .
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1 Introduction Economists view health as a form of human capital that has the potential to improve an individual’s longevity, quality of life, and productivity at work (Grossman, 1972). An im- plication is that medical treatment can be viewed as a costly investment. The Grossman framework has been widely applied in economics to understand how patients make medical decisions by weighing the costs and benefits of different medical treatments. It has also been extended to incorporate other features linked to healthcare decision-making, including learning and uncertainty about drug quality, side effects of treatments and links to labor market decisions and outcomes.
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