Are Idle Hands the Doctor’s Workshop? Effects of Unemployment Shocks on Physical and Mental Health in Puerto Rico

Gustavo J. Bobonis, University of Toronto
Harold J. Toro, University of California, Berkeley

Changes in access to employment may exacerbate or improve the population’s health status as a result of the interplay of complex channels. However, it has been difficult to identify the causal impacts of these economic processes on physical and mental health outcomes. During the 1990s, Puerto Rico experienced changes in access to employment due to the phased-in derogation of U.S. federal tax incentives for manufacturing firms in the island. We take advantage of the exogeneity of the phase-out of tax incentives and its variation across municipalities to assess its effects on the mental and physical health status of the population. In addition, we examine whether these impacts are mediated by the provision of health care services, either public or market-based. Preliminary results suggest that the incidence of depression increased from 21.6 percent to 22.5 percent, an increase of approximately 0.9 percentage points (4.5 percent) in the high de-industrialization municipalities.