The long-lasting health effects of business cycles: How does exposure to economic booms and recessions over the life-course impact later-life health?

Studies suggest that in the short-term health 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 early- and later-adulthood (ages 16-49) have negative long-lasting effects on health at ages 50-74. We link data on macroeconomic fluctuations for 11 countries to survey data from the Survey of Health, Ageing and Retirement in Europe (SHARE). We estimate country-fixed effect models for several measures of physical functioning (incl. grip strength) using exogenous information about the state of the business cycle at specific age-intervals as main covariates. Results show that each additional recession experienced at any age-interval between 16 and 49 years is associated with worse health outcomes at later life. At the same time booms experienced at ages 16-49 can reduce the risk of some disability outcomes later in life. This pattern not only holds for levels of disability but also for changes of functional status at ages 50-74. Our findings suggest that long-run negative effects of less favourable economic conditions outweigh potential positive short-term effects of economic declines. They also raise important questions on the mechanisms linking macroeconomic shocks to health in the long-run.