Friday, 30 December 2016

Perhaps a fitting piece of research to end the year on

A new NBER working paper on Depression for Economists by Jonathan de Quidt and Johannes Haushofer, NBER Working Paper No. 22973, issued in December 2016.

No its not about depressed economists, although recent events are enough to make any economist - especially trade economists - depressed, but rather the economic causes and effects of depression.
Major depressive disorder (MDD) is one of the most prevalent mental illnesses worldwide. Existing evidence suggests that it has both economic causes and consequences, such as unemployment. However, depression has not received significant attention in the economics literature. In this paper, we present a simple model which predicts the core symptoms of depression from economic primitives, i.e. beliefs. Specifically, we show that when exogenous shocks cause an agent to have pessimistic beliefs about the returns to her effort, this agent will exhibit depressive symptoms such undereating or overeating, insomnia or hypersomnia, and a decrease in labor supply. When these effects are strong enough, they can generate a poverty trap. We present descriptive evidence that illustrates the predicted relationships.
But I can't help but think this is, to a degree at least, reinventing the wheel. I'll bet that psychologists have been looking at such things for years.

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