LCC Working Paper Series: 2017-19


Rasheda Khanam, Francisco Perales and Son Nghiem

Non-technical Summary

Understanding the factors that enhance or limit children’s physical and mental health is a topic of increasing interest to researchers and policymakers alike, as child health is known to have short- and long-term effects on academic attainment, adult health and labour market outcomes. Income is one important precursor of child physical and general health, but studies examining income gradients in child mental health remain scarce. In this paper, we examine the income gradient in child mental health using longitudinal data from a large, national cohort of Australian children (The Longitudinal Study of Australian Children). We contribute to the body of existing literature by (i) better accounting for sources of heterogeneity that might give rise to spurious associations between income and child mental health, (ii) examining the evolution of the income gradient in child mental health by child’s age, and (iii) comparing whether child mental health levels and their relationship with income vary when child mental health is assessed by the child’s parent, the child’s teacher and the child herself/himself.

In a first set of analyses we find that children evaluate their mental health more negatively than their parents, who are in turn harsher in their assessments than the teachers. This suggests that population-level estimates of child mental health will be dependent on who assesses the child’s mental health. In addition, we find that assessor discrepancies depend systematically on parental income, being lower in high- than low-income households.

In a second set of analyses we find that, when only a basic set of covariates is present, family income has a significant positive effect on the mental health of Australian children. Yet this effect varies depending on who assesses child’s mental health: it is largest when assessed by parents, and smallest when assessed by the child. However, the income gradient in child mental health fades when we add a more comprehensive set of controls to the model (e.g. maternal health), and when we exploit the panel data to better capture time-invariant unobserved effects.

From a policy perspective, it is important to gain a holistic understanding of the health handicaps experienced by children in low-income households, as these children are known to be vulnerable to disadvantage in other life domains, such as neighbourhood and schooling. Our findings indicate that, depending on the preferred model, the income gradient in child mental health in contemporary Australia is either insubstantial or statistically indistinguishable from zero. Our findings are also indicative that good maternal mental health and positive parenting practices are amongst the factors through which income translates into better childhood mental health. Therefore, these are factors ripe for institutional intervention to redress the (small) gaps in mental health outcomes between children in poorer and richer Australian households. Policy initiatives of this kind can contribute to breaking the cycle of disadvantage experienced by children growing in up in disadvantaged financial circumstances.


November 10, 2017