Long-term economic costs of psychological problems during childhood

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Abstract

Childhood psychological conditions including depression and substance abuse are a growing concern among American children, but their long-term economic costs are unknown. This paper uses unique data from the US Panel Study of Income Dynamics (PSID) following groups of siblings and their parents for up to 40 years prospectively collecting information on education, income, work, and marriage. Following siblings offers an opportunity to control for unobserved family and neighborhood effects. A retrospective child health history designed by the author was placed into the 2007 PSID wave measuring whether respondents had any of 14 childhood physical illnesses or suffered from depression, substance abuse, or other psychological conditions.

Large effects are found on the ability of affected children to work and earn as adults. Educational accomplishments are diminished, and adult family incomes are reduced by 20% or $10,400 per year with $18,000 less family household assets. Lost income is partly a consequence of seven fewer weeks worked per year. There is also an 11% point lower probability of being married. Controlling for physical childhood diseases shows that these effects are not due to the co-existence of psychological and physical diseases, and estimates controlling for within-sibling differences demonstrate that these effects are not due to unobserved common family differences.

The long-term economic damages of childhood psychological problems are large—a lifetime cost in lost family income of approximately $300,000, and total lifetime economic cost for all those affected of 2.1 trillion dollars.

Introduction

This paper investigates the long-term economic costs during one’s adult years of experiencing psychological conditions during childhood. Childhood psychological issues including depression and drug/alcohol abuse are a serious and growing concern among American children. It is estimated that 1–2% of children and 3–8% of adolescents suffer from depression (Prager, 2009). During childhood, males and females are equally affected, but during adolescence the female to male ratio shifts to approximately 3:1, mirroring prevalence in adults (Prager, 2009). Between 1960 and 1975 there was also a shift to earlier age of onset of depression (Klearman & Weissman, 1989).

Stimulated by the work of Barker (1997), recent research has established evidence of a strong link between poor physical health during childhood and even in-utero to health and economic outcomes much later in adulthood (Case et al., 2005, Case et al., 2002, Currie and Stabile, 2003). Much less studied are long-term economic consequences of psychological conditions experienced during childhood. Such studies are difficult, as it simultaneously requires knowing that conditions existed during childhood and the ability to follow the same individuals from childhood into much of their adult life all the while measuring key adult economic outcomes of interest. Moreover, some effects attributed to childhood psychological conditions may instead reflect unmeasured difficulties in the family or neighborhood in which the children were raised. This research deals with both issues by capturing a significant part of the lifespan from childhood into mid-adulthood and by using sibling information to control for unobserved common family and neighborhood effects.

Section snippets

Data

Our analysis is based on the Panel Study of Income Dynamics (PSID), which has gathered 40 years of extensive economic and demographic data on a nationally representative sample of, at baseline, approximately 5000 American families and eventually 35,000 individuals living in those families. Details on family and individual income and labor market activity have been obtained in each yearly wave since 1968. Starting in 1984, at five-year intervals until 1999, PSID asked questions to measure

Results

Fig. 1 lists reported prevalence of childhood psychological conditions. Six percent of respondents reported some psychological condition as a child, 4% mentioned childhood depression, and one in 50 cited alcohol or drug abuse and another two percent mentioned other psychological problems as a child. Lower prevalence rates for alcohol or drug abuse and other psychological problems means there will be less statistical power in estimating their unique impact on adult SES. While prevalence is about

Discussion

Reliable estimates of economic costs of childhood psychological problems have been limited due to the simultaneous absence of long-term panel data with high-quality economic measurement, the lack of control for unobserved background effects that may bias estimates, and an inability to disentangle separate effects of physical and mental childhood illnesses. By introducing a childhood recall model into the best American economic panel, this study makes a major step in resolving those limitations.

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    ☆ This paper was written with the support of grants P01AG008291 and AG029409 from the National Institute on Aging.

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