Financial well-being and mental health: a reciprocal relationship?

Abstract

Using Dutch panel data, we study the reciprocal association between people’s financial well-being and mental health. We estimate models that allow for bi-directional associations between financial well-being and mental health and account for unobserved characteristics that affect each outcome. The estimates reveal that better mental health is associated with greater financial well-being and that greater financial well-being is associated with better mental health. However, the influence of mental health on financial well-being appears stronger than the influence of financial well-being on mental health.