Depression and labor supply: Evidence from the Netherlands

We estimate the relationship between depression and labor-market outcomes using data from the Longitudinal Internet studies for the Social Sciences (LISS) panel (2008 — 2018) from the Netherlands. The paper provides three main findings. First, depression is not associated with women’s labor market participation, but it is associated with their likelihood of having paid employment (conditional on being in the labor force). Second, depression is associated with men’s labor force participation, likelihood of having paid employment and likelihood of working full time. Third, severity of depression matters. More severe symptoms are associated with more adverse labor-market outcomes. In addition, we examine the mechanism behind the relationship between depression and labor market outcomes. We find that happiness, life satisfaction, and pessimistic beliefs about the future are partially mediating the effects.