When African households suffer from a shock, such as losing a family member or property it affects not only their mental health but also their household income. An expansion of psychiatric care is needed.
Households in developing countries are subject to considerable risk and shocks, but most don’t have the ability to deal with them using formal mechanisms. We use five rounds of South African NIDS panel data and investigate the impact of shocks on the mental health of individuals. We find that experiencing idiosyncratic shocks, such as the death of a supportive family member and loss of assets, has significant negative impacts on mental health. Dynamic System GMM regression results suggest that one of the key pathways by which the death of a family member affects mental health is through reduction of household income. Our results suggest that there is a large scope for improving welfare further through social support and insurance mechanisms. The results also call for expansion of psychiatric and therapeutic care in Africa, which currently appears to be at the lowest level compared to the rest of the world.