JOURNALOF E C O I ELSEVIER Journal of Health Economics 17 (1998) 85-104 The effects of low-pay and unemployment on psychological well-being: a logistic regression approach I. Theodossiou * Department of Economics, Unit,ersity of Aberdeen, Edward Wright Building, Dunbar Street, Old Aberdeen, AB24 3QY, UK Received 1 June 1995; accepted I March 1997 Abstract The paper explores the relationship between unemployment and mental distress. The analysis draws upon data from the 1992 British Household Panel Study (BHPS). Six different measures of mental distress are used. Controlling for a number of individual characteristics, unemployed individuals are found to suffer significantly higher odds of experiencing a marked rise in anxiety, depression and loss of confidence and a reduction in self-esteem and the level of general happiness even compared with individuals in low-paid employment. This finding highlights the involuntary nature of unemployment. The results also suggest that all six measures of psychological well-being are lower in middle age compared with younger and older age groups. In addition, women appear to be tess affected by unemployment than men. © 1998 Elsevier Science B.V. JEL classification: J29 Keywords: Psychological well-being; Unemployment;Low-pay * Corresponding author. Tel.: +44-1224-272183; fax: +44-1224-272181; theod@abdn.ac.uk. 0167-6296/98/$19.00 © 1998 Elsevier Science B.V. All rights reserved. PII S0167-6296(97)00018-0 e-mail: