Major Depressive Disorder and Labour Market Outcomes – Evidence from Finnish Administrative Panel Data

Abstract

This master’s thesis studies the effects of major depressive disorder on labour market outcomes, mainly earnings. Major depressive disorder has been shown to associate negatively with labour market outcomes. Most studies of this topic use survey data and are often constrained in the longitudinal sense. This thesis presents both short- and long-term results of the effects of depression on earnings from a series of 16-year event studies conducted on Finnish administrative data. Depression is found to decrease yearly earnings on average by around a month’s median Finnish salary during the year of diagnosis with a decreasing long-term trend. The longer and more severe depression is the stronger the magnitude of the effect. Finally, large differences are found in the impact of depression on individuals on different earning levels with lower earners having a more consistent negative effect even before diagnosis and higher earners showing increased yearly earnings leading up to the diagnosis and a subsequent strong decline. Overall, long-term effects are negative for all the cases studied.