A Structural Analysis of Mental Health and Labour Market Trajectories

Abstract

Abstract We analyse the joint life-cycle dynamics of labour market and mental health outcomes while allowing for two-way interactions between work and mental health. We model selection into jobs on a labour market with search frictions, accounting for the level of exposure to stress in each job using data on occupational health contents. Taking our model to British data from Understanding Society combined with information from O*NET, we estimate the impact of job characteristics on health dynamics and the effects of health and job stress contents on career choices. We use our model to quantify the effects of job loss, health shocks, or job stress shocks that propagate over the life cycle through both health and work channels. We also estimate the (large) values workers attach to health, employment, or nonstressful jobs.