The Impact of Psychiatric Disorders on Labor Market Outcomes

Data on 2225 men and 2401 women from the National Comorbidity Survey were used to examine the impact of psychiatric disorders on employment and conditional work hours and income. Two-stage instrumental variables methods were used to correct for the potential endogeneity of psychiatric disorders. The instruments used (the psychiatric disorder history of the respondent and respondent's parents) passed tests of the overidentifying restrictions. Psychiatric disorders significantly reduced employment among both men and women. Evidence was also found of small reductions in the conditional work hours of men and a substantial drop in the conditional earnings of men and women, although these findings were somewhat more sensitive to the estimation methods and specification of the model.