Project Description

The following is a summary of a research project by the authors. For more information please see the published working paper:

Johnston DW, Kung CSJ, Shields MA. (2020). Who is resilient in a time of crisis? The importance of financial and non-financial resources. IZA Discussion Paper Series, No. 13720.

Authors: Professor David DW Johnston1, Dr Claryn SJ Kung1, Professor Michael A Shields1,2

  1. Centre for Health Economics, Monash University, Melbourne, Australia
  2. Institute of Labor Economics (IZA)

The COVID-19 pandemic has brought about a substantive increase in psychological distress: for instance, the Australian Bureau of Statistics reports that in April 2020, 35% of Australians felt nervous and 11% felt hopeless at least some of the time, compared with 20% and 9% respectively over the 2017-18 period.

The authors of this study find a clear protective role of the non-cognitive skill ‘self-efficacy’, against experiencing a large increase in symptoms of psychological distress during the course of the COVID-19 pandemic. Financial resources including income and savings, cognitive ability, religiosity, and neighbourhood social capital, are not predictive of this resilient response, despite the well-established positive associations between these factors and psychological outcomes in the literature.

Resilience fundamentally describes the maintenance or quick recovery of mental health during and after exposure to significant stressors. Talk about resilience is everywhere nowadays: there has been a growing interest in building and strengthening resilience in the general population – in economic, political, and public health agendas alike. Resilience is important because nearly every individual will experience a major adverse event at some point in their life, be it at the individual (e.g. death of a loved one) or community level (e.g. natural disasters). However, learning who is resilient, and who is not, is important when thinking about the best interventions and targeted policies to promote resilience.

The authors aimed to explore the resources predicting a resilient psychological response during the pandemic, that is, among individuals who do not report experiencing a large rise in psychological distress. Using the UK Household Longitudinal Study (Understanding Society), the study documents a substantive increase in symptoms of psychological distress during the COVID-19 outbreak (observed in April, May, June, and July 2020), from the 2017-2019 period. Comparing individuals who are identical on key demographic and socioeconomic characteristics, the study finds that individuals with greater financial resources or cognitive skills, or higher levels of religiosity or neighbourhood social capital, are not protected from experiencing a large increase in symptoms of distress.

The study provides robust evidence that self-efficacy is strongly predictive of a resilient response: a one-standard deviation higher level of self-efficacy reduces the likelihood of a severe increase in psychological distress by around 3 percentage points, or around 20% relative to the sample mean. Self-efficacy is the belief that one can perform novel or difficult tasks to attain desired outcomes, and therefore represents a self-confident view of one’s capability to deal with life’s stressors. This is close to the concept of locus of control, which is the focus of a growing literature on the role of non-cognitive skills in economic behavior.

These findings are robust even when comparing individuals within the same household, when restricting the sample based on past levels of distress, and when observing distress at different time points in the pandemic. Moreover, there is little heterogeneity in the protective, or resilience-enhancing, role of self-efficacy across an array of population subgroups. That is, no significant differences are observed between males and females; core working-age adults and older people; people with and without a university degree; and people above and below median household income.

Self-efficacy is viewed as amenable and can be trained and strengthened, and may have a social multiplier effect. This points to a clear target for investment that reduces the psychological impact of future adverse events, which is important in an increasingly uncertain global environment. Recent crises close to home include the unprecedented 2019-2020 Australian bushfires, and the strict 112-day COVID-19 lockdown in Melbourne after a spike in cases in July 2020. Both situations have raised the affected population’s need for mental health care and support, and the Australian Government has responded by allocating greater funding for these services. Having a resilient population may therefore reduce the costs (i.e. the ‘damage function’) of any future crisis.

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