April 2021

IZA DP No. 14316: Mental Health and Abortions among Young Women: Time-Varying Unobserved Heterogeneity, Health Behaviors, and Risky Decisions

In this paper, we provide causal evidence on abortions and risky health behaviors as determinants of mental health development among young women. Using administrative in- and outpatient records from Sweden, we apply a novel grouped fixed-effects estimator proposed by Bonhomme and Manresa (2015) to allow for time-varying unobserved heterogeneity. We show that the positive association obtained from standard estimators shrinks to zero once we control for grouped time-varying unobserved heterogeneity. We estimate the group-specific profiles of unobserved heterogeneity, which reflect differences in unobserved risk to be diagnosed with a mental health condition. We then analyze mental health development and risky health behaviors other than unwanted pregnancies across groups. Our results suggest that these are determined by the same type of unobserved heterogeneity, which we attribute to the same unobserved process of decision-making. We develop and estimate a theoretical model of risky choices and mental health, in which mental health disparity across groups is generated by different degrees of selfcontrol problems. Our findings imply that mental health concerns cannot be used to justify restrictive abortion policies. Moreover, potential self-control problems should be targeted as early as possible to combat future mental health consequences.