Abstract:
Disasters adversely affect mental well-being. However, little is known about their causal effects on diagnosed psychological disorders or the mediating role of earnings. This study uses a Synthetic Difference-in-Differences approach (SDID) to examine Cyclone Gabrielle's impact on workers' mental health and earnings in New Zealand. By leveraging administrative data on prescribed medications and income tax records, we find that workers residing in heavily damaged areas were more likely to be prescribed medication for treating psychological disorders than those living in similar unaffected areas. Contrary to common belief, income effects played a limited role in mediating the impact of disaster damage on mental health. Instead, physical and emotional trauma due to direct exposure emerged as key mechanisms influencing mental health outcomes. These findings underscore the critical role of non-economic factors in shaping psychological well-being following disasters triggered by natural hazards.
