Globalization and Mental Distress

We study the effects of import competition on workers' mental distress, using unique longitudinal data on mental health for British residents, coupled with measures of import competition in more than 100 industries over 1995–2007. We find that import competition has a large negative impact on individual mental health. Compared to a worker employed in the industry at the 25th percentile of the import competition distribution, a worker employed in the industry at the 75th percentile would need a yearly monetary compensation of £270 to make up for her greater utility loss. We find import competition to have larger effects on the right tail of the mental distress distribution, thereby increasing inequality in mental health not only across but also within industries. We show that this is consistent with import competition disproportionately hitting specific groups of workers in an industry, such as the youngest or those with a large family, a poor financial condition, a short job tenure, a temporary contract, and a blue-collar or tradable job. Using information on family ties, we find that import competition has negative spillovers to other family members. In particular, women's mental distress increases as a consequence of the import competition faced by their partners. Moreover, paternal import competition leads to reduced investment in child rearing and worsened children's self-esteem and life satisfaction. Finally, we provide evidence that import competition is likely to work through a complex set of channels. These include observable labor market outcomes such as higher likelihood of job displacement and lower wage growth, but also reduced job satisfaction and gloomier expectations about the future.