Elsevier

Social Science & Medicine

Volume 58, Issue 6, March 2004, Pages 1037-1047
Social Science & Medicine

Recessions lower (some) mortality rates:: evidence from Germany

https://doi.org/10.1016/S0277-9536(03)00276-4Get rights and content

Abstract

In his article with the provocative title “Are Recessions Good for Your Health?”, Ruhm (J. Health Econ. 21(4) (2000) 659) has found robust and consistent evidence that the total mortality rate, age-specific mortality rates as well as most specific mortality causes are pro-cyclical. His finding that high unemployment rates are associated with lower mortality and vice versa stands in stark contrast to Brenner's earlier work, who found the opposite effect, possibly after a time lag. Ruhm controls for state-specific effects in a panel of US states over the period 1972–1991, whereas Brenner's work is based on time-series analysis. Extending and improving upon Ruhm's original analysis, we analyse the effect of state unemployment and economic growth rates on mortality in the states of Germany over the period 1980–2000, both in a static and a dynamic econometric model. Controlling for state-specific effects, we find evidence that aggregate mortality rates for all age groups taken together as well as most specific age groups are lower in recessions. The same is true for mortality from cardiovascular diseases, pneumonia and influenza, motor vehicle accidents and suicides, but not for necessarily for other specific mortality causes. In particular, there is never a statistically significant effect on homicides, other external effects and malignant neoplasms. There are also few differences apparent between the effect on male and female mortality. If we do not control for state-specific effects, then we often arrive at the opposite result with higher unemployment being associated with higher mortality. This suggests that a failure to control for time-invariant state-specific effects leads to omitted variable bias, which would erroneously suggest that mortality rates move counter-cyclically. Overall, we can confirm Ruhm's main finding for another country: recessions lower some, but not all, mortality rates in the case of Germany.

Introduction

The effect of short-term economic fluctuations on the state of health in general and mortality in particular has found the interest of scholars since Forbes & McGrego (1975), Forbes & McGrego (1979), Forbes & McGrego (1987), Brenner's (1995), Brenner's (1973) path-breaking work. Brenner found with the help of time-series analysis that recessions are associated with deteriorating health in the United States, England and Wales and Sweden. Others have failed to find analogous evidence in a replication of his work on other countries or time-periods (Forbes & McGregor 1984; Wagstaff 1985; Joyce & Mocan 1993). The major advantage of Ruhm's (2000) analysis of the effect of unemployment rates on mortality rates in US states over the period 1972–1991 is the use of panel data. He finds that ‘state unemployment rates are negatively and significantly related to total mortality and eight of the ten specific causes of fatalities’ (Ruhm 2000, p. 617, emphasis in original). In other words, mortality behaves pro-cyclically as it moves with the business cycle. Panel data analysis has the advantage over time-series analysis that it can control for time-invariant state-specific effects and thus control for a potentially important source of omitted variable bias.

Gerdtham and Ruhm (2002) find similar evidence to Ruhm (2000) in pooling data from OECD countries. Ruhm (2001) himself has repeated his analysis on individual rather than aggregate data from the 1972–1981 US National Health Interview Surveys, coming to very similar conclusions as his analysis with aggregate data. In particular, he finds that the number of medical problems, the prevalence of acute morbidities and the number of reported “bed-days” all fall in economic recessions. Gerdtham and Johannesson (2002), on the other hand, find in their analysis of individual data from Sweden that some aspects of male mortality move counter-cyclically rather than pro-cyclically, whereas the business cycle is unrelated to female mortality. However, Tapia Granados (2003) in his analysis of the relationship between economic fluctuations and aggregate mortality in the 19th and 20th century does find a pro-cyclical movement in Swedish mortality rates. Tapia Granados (2002) finds similar results pooling data from the 50 Spanish provinces over the period 1980–1997.

The objective of this paper is to test the relationship between aggregate mortality and economic fluctuations for a different nation-state, namely Germany over the period 1980–2000. For Germany, no comprehensive individual data are available. Germany is an obvious candidate for an analysis of aggregate data, however, since similar to the US it is a federal nation-state, which allows panel data analysis, and as one nation-state, Germany is also more homogeneous in terms of population characteristics than a pool of nation-states, which helps to reduce omitted variable bias. We will show that economic recessions lower aggregate and some specific mortality rates, thus providing more support for Tapia Granados’ (2002, p. 41) contention that ‘the pro-cyclical character of mortality fluctuations is beginning to be a proven fact’.

Like Ruhm (2000) we also use fixed-effects estimation. At the same time, we improve on his analysis in a number of ways. First, we use standard errors, which are robust towards arbitrary heteroscedasticity and autocorrelation. Second, in sensitivity analysis we additionally make standard errors robust towards clustering such that observations are merely assumed to be independent across states, but not necessarily within states. Third, we use a dynamic model, which does not require the researcher to specify the number of time lags included in the model, a decision, which is always and by necessity somewhat arbitrary. Instead, we include the lagged dependent variable and correct for the correlation of the regressor with the error term with the help of Arellano and Bond's (1991) generalized method of moments (GMM) estimator. Fourth, we look at gender-specific mortality rates to test for gender differences.

Section snippets

The impact of economic fluctuations on health

There are many theories of the impact of economic fluctuations on health conditions. However, one can perhaps distinguish between two main perspectives. As the main objective of this paper is an empirical analysis, we will merely sketch the arguments here. The reader is referred to Brenner and Mooney (1983), Watkins (1985), and Ruhm (2000) and the many references cited therein for a more extensive discussion. One perspective focuses on the social and psychological aspects of the hardship caused

The dependent variables

Like Ruhm (2000) we include total mortality for all age groups taken together as well as total mortality for three specific age groups (20–44, 45–64, older than 65) and ten specific mortality causes: malignant neoplasms (ICD 140–208), cardiovascular diseases (ICD 390–459), pneumonia and influenza (ICD 480–487), chronic liver diseases (ICD 571), motor vehicle accidents (E810–825), intentional self-damage (suicide) (E950–959), murder and manslaughter (homicide) (E960–969), other external effects

Results

We start with the static model with contemporaneous effects only. Table 1 presents results for aggregate mortality rates for all age groups, specific age groups as well as for both sexes. Note that for simplicity, only the coefficients of the unemployment rate is shown, whereas the coefficients of the other control variables and the year-specific time dummies are suppressed. We will come back to the other control variables further below. We can see that the unemployment rate is negatively and

Sensitivity analysis

We will now test the sensitivity of our results with regards to model specification. For reasons of space, we will merely describe but not report detailed results, which are available from the author upon request, however. To start with, we include the Gini coefficient as a further control variable. As mentioned above, this variable is only available from 1985 onwards. Our results are hardly affected. The coefficient of the income inequality variable itself often has a positive sign, but it is

Discussion

We have seen that economic downturns are associated with higher mortality in German states similar to the pattern observed by Ruhm (2000) for the states of the United States of America. The effect is statistically significant for aggregate mortality rates for all age groups taken together, all specific age groups and for both males and females. This is by and large true independent of whether the static or dynamic model is estimated and independent of whether the indicator for economic

Conclusion

All in all, we have found confirmation for Ruhm's (2000) general result in our analysis of German states: recessions tend to lower mortality rates. We find consistent and robust evidence that recessions lower aggregate mortality rates for all age groups taken together as well as all specific age groups. We find less consistent evidence for specific mortality causes than Ruhm (2000) did. For both sexes taken together, we find the predicted effect for cardiovascular diseases, pneumonia and

Acknowledgements

Helpful comments from Christopher Ruhm, José A. Tapia Granados, Stephen Birch and two anonymous referees are gratefully acknowledged. I would like to thank Peter Krause from the German Institute for Economic Research as well as many individuals in the German Federal Statistical Office and as in some state Statistical Offices for providing the data required for the analysis.

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