What are the effects of recessions on health?

The restrictions placed on economic activity to reduce the spread of the coronavirus will lead to a recession, and it is likely to be considerably larger than the one that followed the 2007/08 global financial crisis.

An economic downturn affects people’s lives in many ways: through higher unemployment, reduced economic activity, reductions in income and wealth, and greater uncertainty about future jobs and income. A large body of economic research has investigated how recessions affect people’s health behaviours, their health conditions and mortality – and how these outcomes vary across different generations and different socio-economic groups.

What does evidence from economic research tell us?

• Many studies show that the rate of deaths falls in recessions compared with booms, although more recent research suggests that the link between mortality and macroeconomic conditions is weaker than previously estimated.
• Recessions – and in particular higher unemployment – increase rates of chronic illnesses in the years after the recession.
• Different groups of people are affected in different ways depending on their circumstances before a recession. The effects differ across generations, regions and socio-economic groups. A related contribution focuses specifically on the effects of recessions on children’s health.
• he effects of recessions on health differ across different health conditions, as well as by mortality (the rate of deaths) and morbidity (the incidence of health conditions or disease in the population).
• The impact of a recession on both mortality and morbidity also differ according to the time frame considered (during the course of the recession itself, in the immediate short run aftermath, or in the long run).

How reliable is the evidence?

The evidence is predominantly from peer-reviewed research, using data from high-quality administrative or large nationally representative cross-sectional and longitudinal surveys. The evidence on the average effect of recessions – that is, the simple question of whether recessions have a positive or negative effect on health – is somewhat mixed and depends on the country of study, the time frame and recession being studied (Ruhm, 2015), and the level at which geographical regions are aggregated (Lindo, 2015).

Short-run effects

Intuitively, it might seem natural to think that mortality increases in bad economic times. Indeed, when looking at individual-level data, such as a study of workers in Pennsylvania in the 1970s and 1980s, those losing their jobs had increased mortality rates immediately after the job loss (Sullivan and von Wachter, 2009). While the effect declines over time, even 20 years after the displacement, the rates of death are higher among those workers that lost their jobs.

But when looking at mortality among the whole population (not just those who lose a job as a result of a recession), most studies of recessions prior to the financial crisis of 2007/08 find that the rate of deaths is lower during recessions than during booms (for example, Ruhm, 2000).

The reduction in deaths occurs through a number of channels. During a recession, lower general economic activity means that air pollution is reduced, and mortality from certain diseases that are usually worsened by pollution may be avoided (Janke et al, 2009). This also applies to road and workplace accidents (Miller et al, 2009).

Moreover, when people's incomes are reduced, they might eat more healthily and reduce consumption of alcohol or cigarettes (Griffith et al, 2016; Adda et al, 2009). One study also finds that recessions slow the spread of diseases transmitted by viruses, because people move less between different regions for business or leisure (Adda, 2016).

More recent studies, and studies of European countries, show that when looking across business cycle fluctuations in the twenty-first century (and specifically the recession following the 2007/08 global financial crisis), overall mortality does not decline in recessions. Rather, it is either unaffected by macroeconomic conditions or slightly increasing in recessions (see, for example, Ruhm, 2015, for analysis of the United States; or Economou et al, 2008, for a study of European countries).

Many studies find that mental illness and deaths by suicide increase in recessions (for example, Charles and DeCicca, 2008), and a review of the evidence goes so far as to say that the deterioration of mental health in recessions is the only well-established finding across studies (Bellés-Obrero and Castelló, 2018).

Long-run effects 

The long-run effects of economic downturns on morbidity are large and persistently negative. One study finds that even if recessions reduce mortality at the time of the recession, workers who experience a recession in their fifties are expected to die sooner, indicating that the long-run effects on health are negative (Coile et al, 2014). Another study finds that unemployment caused by the 2007/08 global financial crisis increased the prevalence of chronic illness, especially mental illness, in the UK over the two years following the onset of the recession (Janke et al, 2020).

Other studies show a link between long-run chronic illness and mortality (Kivimäki et al, 2018), so the long-run effects on mortality may also be more negative.

Studies also show that recessions experienced in early childhood can have an impact on mortality at the end of life, implying effects that last the lifetime of the individuals who are born during recessions (Van den Berg, 2006). By definition, in order to have data on the full life cycle of these individuals from birth to death, these studies cover recessions that are far in the past, so a question remains of whether the results can be generalised to today’s context.

Effects of structural change

The effects of downturns that are part of macroeconomic business cycle fluctuations may differ in some ways from more fundamental or structural changes to the economy. For example, the concept of ‘deaths of despair’ (Case and Deaton, 2015, 2017) has been coined as a result of decades of industrial decline in the United States, which have increased mortality especially among low-educated men (see also for example, Pierce and Schott, 2020). This kind of structural change takes place over several business cycles rather than during one recession, and its effects are distinct from the health effects of the more temporary state of a recession.

This summary has not focused on the impact of recessions on children – a separate contribution discusses the ways in which children’s health may be affected in the current situation.

What else do we need to know?

There is a large amount of evidence on the effects of past recessions on health. In the current pandemic, as with any new situation, it can be difficult to assess the extent to which those results are applicable. For example, the relationship between mortality and recessions may have changed in recent decades.

In addition, none of the previous recessions that have been studied were associated with a global pandemic or lockdown. To make predictions about the impact of the current recession on health, we need to assess each of the potential mechanisms in turn and assess the degree to which the driving factors are affected in this recession.

We do not yet know the size or duration of the current recession, and when generalising from past studies, the effects may not be proportional. A recession twice the size of the global financial crisis may have twice as large an impact on health as that crisis; but the impact could also be smaller or larger.

In addition, health deteriorations in the long run are difficult to quantify, which means that it is challenging to take them into account when assessing the costs and benefits of current policies.

Where can I find out more?

Social distancing saves lives. So do recessions: Angus Deaton and Anne Case discuss how the lockdown measures may actually save lives through mechanisms that are additional to avoiding the Covid-19-related deaths.

Recessions and health: the long-term health consequences of responses to the coronavirus: James Banks, Heidi Karjalainen and Carol Propper summarise some of the evidence of the impact of recessions on health.

How might the Covid-19 recession affect your health? An economist explains: Christopher Ruhm talks about the potential effects of the current recession on health.

The impact of COVID-19 on chronic health in the UK: Katharina Janke, Kevin Lee, Carol Propper, Kalvinder Shields and Michael Shields summarise the evidence from a recent study about long-term effects of recessions on chronic illness.

COVID-19 pandemic hits mental health, especially of the young and of women, and widens inequalities: James Banks and Xiaowei Xu analyse a survey of nearly 12,000 people and find substantial negative impacts on mental health across the population.

Who are experts on this question?

• James Banks, Professor of Economics at the University of Manchester and Co-Director of the Centre for the Microeconomic Analysis of Public Policy at the Institute for Fiscal Studies
• Carol Propper, Professor of Economics at Imperial College Business School in the Department of Economics and Public Policy
• Andrew Oswald, Professor of Economics and Behavioural Science at the University of Warwick
• Michael Shields, Professor at the Centre for Health Economics at Monash University
• Richard Layard, Programme director of Wellbeing Programme at the Centre for Economic Performance at the London School of Economics
• Xiaowei Xu, Institute for Fiscal Studies

Author: Heidi Karjalainen, IFS

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