Christian Posso, Banco de la República de Colombia

Paper: The Early-Career Effects of Anxiety and Depression

Abstract: Mental illness tends to arise when young workers are establishing themselves in the labor market. Using nationwide employer-employee records and medical claims data from Colombia, we use a matched difference-in-differences design to estimate the long-run effects of common mental health disorders on earnings. Among a cohort of young, formally-employed workers, newly diagnosed anxiety and depression reduce earnings for at least five years following diagnosis. In the short run, earnings losses mainly reflect fewer days worked; in the longer run, they reflect lower employment and wages. Part of the earnings effect is driven by reduced employment at firms with high wage premia, consistent with impaired mobility up the job ladder. To examine whether treatment mitigates these losses, we use an instrumental variables design that leverages insurer-specific variation in access to specialty mental health care. Treatment offsets most of the earnings penalty among compliers, suggesting that timely mental health care can help preserve economic opportunity.