Income insecurity and mental health in pandemic times

Abstract

This paper contributes to the literature on the impact of the COVID-19 outbreak on mental health by providing novel evidence of its interaction with labor market conditions and the long-term persistence of these effects. We run four waves of a large-scale representative survey in Spain between April 2020 and April 2022, and benchmark our data against a decade of pre-pandemic information. We document an increase in the share of individuals reporting depressive feelings from 16% prior to the pandemic to 46% in April 2020. We show that this effect is more pronounced for women, younger individuals and those with unstable incomes. We apply machine learning techniques, mediation analysis and event studies to document the role of the labor market as an important driver of these effects. Our results are crucial for the design of targeted policies that proof useful in overcoming the long lasting consequences of the pandemic.