The Impact of Recession on Health in Canada

Presented By: Dr. Ehsan LatifSchool of Business and Economics

Thompson Rivers University, BC, Canada

The recent Canadian recession of 2008-2009 has generated interest among researchers to examine its causes and consequences.

Impact studies using Canadian data primarily focused on the effects of recession on income, employment, wealth, and poverty.

To understand the full costs of the recession, it is important to examine the impact of recession on health outcomes. A negative impact of recession on individual health may persist over a long period of time with consequences in health care expenditures as well as in labor productivity.

Introduction

The objective of this study is to utilize Canadian data to examine the impact of recession on individual health, and it is expected that the results of this study will help health policy makers assessing whether or not extra steps are needed during a recession to support Canadians.

Introduction

Ruhm (2003), Ruhm (2005), Neumayer (2004), and Gerdtham and Ruhm (2006): counter cyclical relationship for health measures - state unemployment rate was associated with the improvement of health.

Charles and DeCicca (2008), Economou (2008) and French and Davalos (2011): evidence of pro-cyclical relationships for health and mental health. State unemployment rate was associated with the decline in health.

Literature Review

Arizumi and Schirle (2012): Using Canadian data, they found some evidence of a strong pro-cyclical pattern in the mortality rates of middle-aged Canadians. However, the study found no significant cyclical pattern in the mortality rates of seniors and infants.

Literature Review

No conclusive evidence regarding the impact of recession on health outcomes.

Studies mainly used data from the United States and Europe. There is only one Canadian study.

Only French and Davalos (2011) used individual specific fixed effects approach while all other studies utilized either state fixed effects or MSA fixed effects approach.

Literature Review: Summary

Unlike other studies, this study focused on the health outcomes measured by the self-reported health status.

Recognizing that individual specific unobserved heterogeneity may impact health outcomes, this study estimated models that controlled for individual specific fixed effects.

The study conducted a number of sub-group analyses based on gender, age, education and marital status, to better understand the relationship between unemployment rate and health.

Contribution of this Study

The study used longitudinal data from Canadian National Population Health Survey (NPHS) covering a period from 1994 to 2006.

This present study restricts the sample to individuals aged 16 and 64, yielding 28952 person-wave observations.

The provincial unemployment rate was estimated taking the average of the monthly provincial unemployment rates over the survey year.

Data

Unemployed people have more time to spend on health related activities, such as exercises, cooking at home and visiting physicians. These healthy behaviours may contribute to improving health outcomes.

Unemployment may lead to loss in income, and consequently individuals may not spend on a costly nutritious diet, which may result in health deterioration.

Methodology: Conceptual Issues

If income falls because of unemployment, individuals are likely to spend less on drinking and smoking. This positive health behaviour may improve health.

Unemployed people do not have to suffer from job related stress and anxiety. This is good for both mental and physical health. However, unemployed people are not immune from the tension and anxiety related to the uncertainty about future job prospects and income. This may contribute to a decline in health.

Methodology: Conceptual Issues

Unemployed people do not have a risk of suffering from job related injuries that are prevalent in industries such as construction, mining, and logging.

Furthermore, unemployed people may travel less and consequently they have a lower risk of being involved in a road accident.

Methodology: Conceptual Issues

Oijt = β0+ Xitβx + βuUjt + μi + εijt

Dependent Variable: Self Reported Health Independent Variables: age, marital status,

education, household income, location of residence, home ownership, provinces, physical activity, year dummies, and province specific time trend.

Methodology: Empirical Issues

Unobserved individual specific heterogeneity: Individual specific fixed effects approach.

Reverse Causality: Not a problem because of macro and micro data.

Methodology: Empirical Issues

Ordinary Least Square Method

Individual Specific Fixed Effects Method

First Difference Method

Methodology: Empirical Issues

Results: Self Reported Health

Variable OLS Model

Fixed Effect Model

First Difference Model

Unemployment Rate

.035*(.013)

.030**(.013)

.035**(.015)

Results: Self Reported Health

Variable:

Unemployment Rate

OLS Model Fixed Effect Model

First Difference Model

Male .038**

(.018)

.025

(.019)

.035

(.023)Female .034**

(.016)

.037**

(.018)

.039**

(.020)

Results: Self Reported Health

Variable:UnemploymentRate

OLS Method

Fixed Effects Method

First Difference Method

Age: less

than 25

-.133

(.116)

-.187**

(.091)

-.223**

(.105)

Age: between

25 and 54

.037*

(.013)

.031**

(.013)

.036**

(.015)

Age: more

than 54

.089*

(.037)

.055*

(.022)

.064**

(.032)

Results: Self Reported Health

Variable:UnemploymentRate

OLS Method

Fixed Effects Method

First Difference Method

Single .035

(.055)

-.031

(.031)

-.032

(.032)

Married .035*

(.013)

.042*

(.016)

.043*

(.017)

Widow .051

(.051)

.111

(.076)

.115

(.070)

Results: Self Reported HealthVariable

UnemploymentRate

OLS Method

Fixed Effects Method

First Difference Method

Education: less than

secondary

.021

(.038)

-.039

(.039)

-.048

(.045)

Education: secondary

graduate

.042

(.041)

.106*

(.037)

.113*

(.042)

Education: post-

secondary

.002

(.026)

.011

(.027)

.029

(.028)

Education: college -

university

.053*

(.017)

.048*

(.018)

.047**

(.020)

Utilizing the fixed effects method to control for individual specific unobserved heterogeneity, the study found that for the overall sample, unemployment rate has a significant positive impact on health status.

Results: Summary

In the sub-group analyses, it is found that unemployment rate has a significant positive impact on health for females, individuals aged 25 and more, individuals with secondary graduate certificate and college/ university degree, and for married people;

Results: Summary

Unemployment rate has a significant negative impact on the health status for individuals under 25. Furthermore, unemployment rate has a negative, yet insignificant impact on the health outcomes for individuals with less than secondary education and single individuals, while it has a positive, insignificant impact on the health for males.

Results: Summary

Studies on recent recessions in Canada and in the United States suggest that some groups suffered more during recessions than others:

Males Younger individuals under 25, both males

and females Working age men and women with a high

school education or less Single Individuals

Conclusion

Combining the job loss impact of recession and the impact of recession on health found from this study, it appears that the groups that suffer more from recession in terms of job losses, also experience greater negative impact of recession on health status.

Further study is required to understand the mechanism as to how unemployment rate impacts health status.

Conclusion

Ariizumi, H., & Schirle, T. (2012). Are recessions really good for your health? Evidence from Canada. Social Science & Medicine, 74(8), 1224-1231.

Charles KK, DeCicca P. (2008). Local labor market fluctuations and health: is there a connection and for whom? Journal of Health Economics, 27(6), 1532–1550.

Economou, A., Nikolaou, A., & Theodossiou, I. (2008). Are recessions harmful to health after all?: Evidence from the European Union. Journal of Economic Studies, 35(5), 368-384.

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

References

Gerdtham, U. G., & Ruhm, C. J. (2006). Deaths rise in good economic times: evidence from the OECD. Economics & Human Biology, 4(3), 298-316.

Ruhm, C. J. (2003). Good times make you sick. Journal of health economics, 22(4), 637-658.

Ruhm, C. J. (2005). Healthy living in hard times. Journal of health economics, 24(2), 341-363.

References