From Boom to Bust: Unfolding the association between business cycles and the mental health of Swedish children

Abstract: An extensive body of literature links macroeconomic conditions to mortality and diverse health outcomes in adulthood, but largely ignores the impact on children. Sweden is currently at the verge of an economic downturn, while mental health disorders and psychosomatic problems are the most common health issue amongst children. In this paper, we examine the relationship between business cycles and children’s mental health in Sweden’s 21 regions from 2006 to 2019. The number of patients per thousand inhabitants younger than 18 that expedited an antidepressants prescription is our measure of children's mental health status, whereas unemployment rate is our proxy for business cycles. Using a fixed effects model on a quarterly level, we find a procyclical association between the mental illness of children and unemployment rate. The positive relationship between antidepressant consumption and unemployment is only driven by boys, while girls seem less sensitive to business cycles fluctuations. We conclude that further empirical research and theoretical extensions is required to explore the robustness of our results and to understand the operating channels behind it. Given the individual and societal costs of mental illness during childhood, understanding how contemporary aggregate economic conditions influence the mental health of children is crucial for optimal policy response and countercyclical investments.