In my previous posting I discussed some papers that showed recessions to be good on balance for your health. However, a paper by Rafael Di Tella, Robert J. MacCulloch and Andrew J. Oswald titled "The Macroeconomics of Happiness" finds that there are large psychological costs to recessions. Since emotional health affects physical health, it stands to reason that these findings indicate recessions are bad for health.
We show that macroeconomic movements have strong effects on the happiness of nations. First, we find that there are clear microeconomic patterns in the psychological well-being levels of a quarter of a million randomly sampled Europeans and Americans from the 1970s to the 1990s. Happiness equations are monotonically increasing in income, and have similar structure in different countries. Second, movements in reported well-being are correlated with changes in macroeconomic variables such as gross domestic product. This holds true after controlling for the personal characteristics of respondents, country fixed effects, year dummies, and country-specific time trends. Third, the paper establishes that recessions create psychic losses that extend beyond the fall in GDP and rise in the number of people unemployed. These losses are large.