The Cumulative Toll of Economic Fluctuations: How Does Exposure to Economic Booms and Recessions over the Life-Course Impact Old-Age Disability?

Philipp Hessel, London School of Economics and Political Science (LSE)

Studies suggest that health temporarily improves during economic recessions, but whether these effects are offset by long-run negative health effects has not been established. We examine whether economic recessions and booms during middle age (ages 16-49) have negative long-lasting effects on health at ages 50-74. We link data on macroeconomic fluctuations in 1930-2001 for 11 countries to data from the Survey of Health, Ageing and Retirement in Europe (SHARE). We estimate the impact of business cycle at each decade of life on physical function and grip strength in country-fixed effect models. Controlling for early life circumstance, each additional recession during middle age is associated with worsening health at old age, while each additional boom was associated with reduced disability. This pattern holds for both levels and longitudinal changes in functional status at ages 50-74. Our findings suggest that the long-run negative effects of economic downturns outweigh potential positive short-term effects.