This research examines the mental health inequalities between employed and unemployed individuals among the fluctuations over the business cycle. To analyze whether a recession affects self-evaluated mental health and consequently increases the demand for mental health care, I exploit the sudden increase of the unemployment rate in Spain during the period 2007-2009. First, I analyze the impairment of self-evaluated mental health as a consequence of the Great Recession and if it prevails during the economic recovery. In addition, I estimate if the effect on self-reported mental health is reflected in demand for mental health care. The results from an event study design show that the economic downturn increases the differences between employed and unemployed individuals in self-evaluated mental health. However, and despite the continuous improvement in unemployment, the mental health gap remained unchanged between 2014 and 2017, which could imply the persistence of some lasting impacts of the Great Recession on mental health. Nonetheless, I find a reduction in the differences of using drugs related to mental health during the period 2011-2012, when I estimate the largest inequalities in self-evaluated mental health.
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