Economic Distress and Children’s Mental Health: Evidence from the Brazilian High Risk Cohort Study for Mental Conditions

Abstract

This paper assesses the effects of adverse economic shocks on children’s mental health. We rely on the Brazilian High Risk Cohort Study for Mental Conditions, which provides an unprecedented array of data on psychopathology, life events, family medical history as well as parental behavior and polygenic scores for mental disorders over a 10-year period. Our empirical strategy exploits parental job loss events over time in a difference-in-differences framework. We document that parental job loss significantly worsens children’s mental health resulting in increased clinical diagnoses of mental disorders. These results are robust to several specifications and pre-trends. Heterogeneous results and mechanism analysis indicate that psychological distress in the household brought about by job loss events may be a key mechanism affecting children’s mental health.