Abstract
This paper investigates the link between job displacement and mental health problems. The econometric model allows for the possibility that mental health troubles, once present, feed back to future job displacement. The results show evidence of statistically significant and nontrivial feedback, and that feedback is an important part of the link between job displacement and mental health problems. Specifically, once feedback is taken into account, the link between job displacement and mental health problems shrinks by approximately 45 percent. That conclusion points to an unfortunate loop in which job loss begets mental health troubles, which, in turn, hinder future job prospects. Consequently, policymakers should aim to improve mental health and job prospects by breaking that loop, perhaps through mental health assistance to aid those who experience job displacement, or by easing the job search process for people with mental health troubles.
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