Implicitly estimating the cost of mental illness in Australia: a standard-of-living approach

Nghiem, Son and Khanam, Rasheda ORCID: and Vu, Xuan-Binh ORCID: and Tran, Bach Xuan (2020) Implicitly estimating the cost of mental illness in Australia: a standard-of-living approach. Applied Health Economics and Health Policy, 18 (2). pp. 261-270. ISSN 1175-5652

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Estimating the costs of mental illness provides useful policy and managerial information to improve the quality of life of people living with a mental illness and their families.

This paper estimates the costs of mental health in Australia using the standard-of-living approach.

The cost of mental illness was estimated implicitly using a standard of living approach. We analyse data from 16 waves of the Household, Income and Labour Dynamics in Australia Survey (HILDA) using 209,871 observations. Unobserved heterogeneity was mitigated using an extended random-effects estimator.

The equivalised disposable income of people with mental illness, measured by a self-reported mental health condition, needs to be 50% higher to achieve a similar living standard as those without a mental illness. The cost estimates vary considerably with measures of mental illness and standard of living. An alternative measure of mental illness using the first quintile of the SF-36 mental health score distribution resulted in an increase of estimated costs to 80% equivalised disposable income.

People with mental illness need to increase equivalised disposable income, which includes existing financial supports, by 50%-80% to achieve a similar level of financial satisfaction as those without a mental illness. The cost estimate can be substantially higher if the overall life satisfaction is used to proxy for standard of living.

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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Published online: 17 October 2019. Submitted version deposited in accordance with the copyright policy of the publisher.
Faculty/School / Institute/Centre: Historic - Faculty of Business, Education, Law and Arts - School of Commerce (1 Jul 2013 - 17 Jan 2021)
Faculty/School / Institute/Centre: Current - Institute for Resilient Regions - Rural Economies Centre of Excellence (1 Aug 2018 -)
Date Deposited: 14 Jan 2020 03:01
Last Modified: 06 Aug 2021 04:27
Uncontrolled Keywords: cost of mental illness; a standard of living approach; panel data; extended random-effects estimator; Australia
Fields of Research (2008): 14 Economics > 1402 Applied Economics > 140208 Health Economics
Fields of Research (2020): 38 ECONOMICS > 3801 Applied economics > 380108 Health economics
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