Nicholas Rohde

The effect of economic insecurity on mental health: Recent evidence from Australian panel data☆

This paper estimates the impact of economic insecurity on the mental health of Australian adults. Taking microdata from the 2001-2011 HILDA panel survey, we develop a conceptually diverse set of insecurity measures and explore their relationships with the SF-36 mental health index. By using fixed effects models that control for unobservable heterogeneity we produce estimates that correct for endogeneity more thoroughly than previous works. Our results show that exposure to economic risks has small but consistently detrimental mental health effects. The main contribution of the paper however comes from the breadth of risks that are found to be harmful. Job insecurity, financial dissatisfaction, reductions and volatility in income, an inability to meet standard expenditures and a lack of access to emergency funds all adversely affect health. This suggests that the common element of economic insecurity (rather than idiosyncratic phenomena associated with any specific risk) is likely to be hazardous. Our preferred estimates indicate that a standard deviation shock to economic insecurity lowers an individuals mental health score by about 1.4 percentage points. If applied uniformly across the Australian population such a shock would increase the morbidity rate of mental disorders by about 1.7%.

Distributional Characteristics of Income Insecurity in the U.S., Germany, and Britain

This paper studies income volatility using recent data from the Cross National Equivalence File (CNEF). Measures of downward instability are applied to household income streams and the results are interpreted as indicators of income insecurity. Using this method we examine (i) cross national differences in average insecurity levels, (ii) the effects of taxes and transfers, and (iii) relationships between the insecurity index and household income. Insecurity estimates based on pre-government incomes are highest in Britain and lowest in Germany, however results for post-government incomes are highest in the U.S. It is also shown that insecurity estimates based upon pre-government incomes are heavily concentrated at the lower end of the distribution; although governments are effective at smoothing the income streams of these households. We also search for determinants of our measure and find that gender, household size, health status, and industry affiliations of the household head are the most significant covariates.

The Distribution of Economic Insecurity: Italy and the U.S. Over the Great Recession

We estimate the distribution of economic insecurity in Italy and the U.S. using data from 1994 to 2010. Economic insecurity for each individual is assumed to depend on both current wealth and the changes in wealth that have been experienced in the past. The first element plays the role of the buffer stock that can be relied on in the case of an adverse future event. The second element reflects the individuals confidence in his ability to overcome any losses in the future. With respect to this second element, experiences in the recent past are given greater weight than experiences that occurred in the more distant past. The results confirm that the great recession has had a dramatic effect on the distribution of economic insecurity in both countries with the effect being much stronger in the U.S.

The Problem of Inclusion in Deliberative Environmental Valuation

The idea of inclusive collective decision-making is important in establishing democratic legitimacy, but it fails when citizens are excluded. Stated-preference methods of valuation, which are commonly used in economics, have been criticised because the principle of willingness to pay may exclude low-income earners who do not have the capacity to pay. Deliberative valuation has been advocated as a way to overcome this problem, but deliberation may also be exclusive. In this review, two deliberative valuation frameworks are compared. The first is grounded on the idea of rational discourse that emphasises argument at the expense of other communicative strategies. It seeks to secure inclusion through procedural rules and prerequisites, but fails to address the underlying democratic limitation of argumentation. The second does not rely on the distinction between rational and rhetorical speech, and therefore admits alternative forms of communication. This approach recognises differences in the communicative capacities and practices of those who take part in deliberation, and so is better equipped to improve, though not to guarantee, inclusion.

Lorenz Curves and Generalised Entropy Inequality Measures

Lorenz curves and Generalised Entropy (GE) measures are popular tools for analyzing income inequality. This paper seeks to connect these techniques by demonstrating that GE inequality measures may be derived directly from the Lorenz curve. The paper provides analytical expressions for Theil’s T and L inequality measures, half the square of the coefficient of variation and Atkinson’s utility based measure in terms of the Lorenz curve. Mathematical expressions for common GE measures are derived for three simple parametric specifications. The results are empirically illustrated and shown to be consistent with Lorenz dominance.

Economic Insecurity in Australia: Who is Feeling the Pinch and How?

We produce micro-level estimates of economic insecurity in Australia using a range of different approaches. Measures are calculated annually from 2001 to 2011 and it is observed that when aggregated, they loosely track the national unemployment rate and GDP growth rate. The insecurity indices are then stratified using a number of demographic variables and it is observed that young, unmarried persons with low educational attainments are more insecure than the general population. Panel data regressions show that these individuals are also more insecure when controlling for various factors including time-invariant individual-specific heterogeneity. Further, dynamic models indicate that most individuals have high persistence in insecurity over time.

The self-reinforcing dynamics of economic insecurity and obesity

ABSTRACT This article models the dynamic effects of economic insecurity on body weight. Using Australian panel data, we infer an individual’s level of economic insecurity as a function of exposure to various financial risks and employ regression equations to explore its effect upon current period body mass index (BMI) scores. Estimates reveal that a sustained standard deviation increase in economic insecurity raises an individual’s BMI at a rate of approximately 0.35 units per year. Quantile regressions are then used to estimate the sensitivity of body weight to insecurity at different percentiles of the distribution and we find that persons who are overweight and obese are much more seriously affected. This implies that shocks that make individuals more financially vulnerable can generate harmful self-sustaining cycles of risk and weight gain. We also model the dynamics of insecurity and show that it is a persistent phenomenon for persons with high levels of exposure and lower incomes. This finding indicates that persons of lower socio-economic status are more likely to encounter vicious cycles of increasing insecurity and obesity, which partially explains why weight-related health problems are unusually highly concentrated amongst these individuals.

Measuring the diversity of household spending patterns

Households tend to diversify their spending across a wide range of goods and services as they become more affluent. Recently, there has been growing interest in understanding the precise manner in which this spending diversification process takes place. We review what facts are known about this process and the underlying behavioural tendencies that are thought to drive it. In addition, we clarify the relationship between different approaches to measuring the level of spending diversity. A number of indices are employed, including measures based on joint probabilities, distances and the concept of entropy. Using UK household spending data, we show the extent to which these measures deliver different results and shed light on the nature of behavioural heterogeneity.

Social influences on expressed willingness to pay: results of a deliberative monetary valuation study in Colombia

Deliberative monetary valuation (DMV) methods can support environmental decision making by enabling the exchange of arguments and information to produce more democratic outcomes. The product of a valuation may be an array of expressions of willingness to pay (WTP) by individuals or a collectively agreed monetary value. Concerns have been raised, however, as to whether this product is an outcome of thoughtful and independent decision-making or influenced by social pressures to conform. Our study examines this issue and addresses concerns about the use of DMV, based on a public deliberation of forest conservation in Colombia. We analyzed the impacts of social conformity on WTP under two different decision scenarios: individual and collective. The results suggest that the impacts of social conformity are greater when a collective decision is required. These findings indicate that tensions between the differing goals of DMV could undermine its democratic promise.

The hot hand fallacy re-examined: new evidence from the English Premier League

Previous studies have illustrated human misperceptions of randomness and resultant suboptimal decision-making with reference to the ‘hot hand’ or momentum effect in sport, the notion of serial dependency between outcomes. However, issues of omitted variables bias have plagued many due to a reliance on nonparametric techniques or basic regression models. This article examines across-game and within-game momentum in the English Premier League (EPL) football competition using fixed effects regressions to control for time-invariant heterogeneity in conjunction with traditional nonparametric techniques. Although the results show evidence of performance reversal following winning streaks, no such evidence is found for streaks of draws or losses or in goal-scoring performance within games. This suggests that momentum is better suited as a post hoc label of performance than a robust causal phenomenon.