IZA DP No. 13063: Psychological Resilience to Major Socioeconomic Life Events
Understanding who in the population is psychologically resilient in the face of major life events, and who is not, is important for policies that target reductions in disadvantage. In this paper we construct a measure of adult resilience, document its distribution, and test its predictability by childhood socioeconomic circumstances. We use a dynamic finite mixture model applied to 17 years of panel data, and focus on the psychological reaction to ten major adverse life events. These include serious illness, major financial events, redundancy and crime victimisation. Our model accounts for nonrandom selection into events, anticipation of events, and differences between individuals in the immediate response and the speed of adaptation. We find considerable heterogeneity in the response to adverse events, and that resilience is strongly correlated with clinical measures of mental health. Resilience in adulthood is predictable by childhood socioeconomic circumstances; the strongest predictor is good childhood health.