Estimating the cost of mental illness in Australia: a standard of living approach

This paper estimates the costs of mental health in Australia using the standard-of-living approach. We analyse data from the Household, Income and Labour Dynamics in Australia Survey using an extended random-effects estimator. To the best of our knowledge, this is the first study to examine the cost of mental illness in Australia using the standard of living approach with a nationally representative longitudinal data set. Results from the main specification show that people with a mental illness need to increase their equivalised disposable income by 50% to achieve a similar living standard as those without a mental illness. The cost estimates vary considerably with measures of mental illness and standard of living. An alternative measure of mental illness using the first quintile of the SF-36 mental health score distribution resulted in an increase of estimated costs to 80% equivalised disposable income.