Pandemic Shock, Employment Status, and Mental Health: The Moderating Role of Family Support

Abstract

Employing panel data from the China Family Panel Studies (CFPS) and leveraging fixed effects model validated by Lasso and Ridge stability checks, we find that job loss significantly deteriorates mental well-being. Among various forms of family support, only financial assistance from parents emerges as a significant buffer against the psychological distress of unemployment. Notably, the dynamic interplay of intergenerational support reveals a dual role. While employed individuals derive well-being from receiving more support from their children than from their parents, this pattern reverses during unemployment. The same imbalance becomes a psychological burden when unemployed, as individuals tend to rely more on parental support rather than support from their children. Exploiting the COVID-19 pandemic as a natural experiment, our Difference-in-Differences (DID) analysis uncovers a temporal paradox that unemployed individuals experienced a relative mental health advantage in 2020, which had dissipated by 2022. This pattern emerged even as the pandemic imposed a widespread and deepening psychological toll, as shown by Bayesian Additive Regression Trees (BART) estimates. Finally, heterogeneity analysis identifies women, small-sized households, and adults aged 45 to 65 as the most psychologically vulnerable to job loss.