1186072

research-article2023
SRDXXX10.1177/23780231231186072Socius: Sociological Research for a Dynamic WorldRauf

Original Article Socius: Sociological Research for

a Dynamic World
Volume 9: 1­–15
Mental Health Effects of Income over the © The Author(s) 2023
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DOI: 10.1177/23780231231186072
https://doi.org/10.1177/23780231231186072
srd.sagepub.com

Tamkinat Rauf1

Abstract
While a gradient between income and depression is well documented, associational estimates are subject to bias
due to measurement errors, reverse causation, and other sources of confounding. Causal studies are few and
report small and divergent estimates, even in their direction. But prior research has important limitations for
causal inference, such as relying on comparisons between individuals sensitive to each other’s relative income or
capturing only a subset of pathways through which income affects well-being. This study leverages longitudinal and
genomic data to assess how much some known biases affect the income-depression gradient and to what extent
the gradient might be reflective of a causal effect. Findings from three U.S. samples—representing early midlife,
late midlife, and older adulthood—are suggestive of a beneficial effect of income on mental health, especially in
late midlife and beyond. The results have implications for interpreting the nature of socioeconomic disparities in
mental health.

Keywords
depression, mental health, income effect, income-depression gradient, income-health gradient, life course

An inverse association between income and various indica-
tors of mental health—including clinical depression, depres-
sive symptoms, and other indices measuring psychological
distress and negative affective well-being—is widely docu-
mented (Eaton et al. 2001; Heflin and Iceland 2009; Kessler
1982; Martikainen et al. 2003; Ross and Huber 1985;
Stewart-Brown et al. 2015). However, the extent to which
these estimates reflect a causal relationship is unclear.
Estimating effects by controlling only for observed con-
founders (or no controls at all) in cross-sectional data is vul-
nerable to reverse causation and other sources of bias that
would overestimate the true casual effect. On the other hand,
the presence of certain other confounders can result in under-
estimation, and estimates based on current income may be
further attenuated due to measurement error and temporary
income fluctuations.
While innovative causal designs have been employed to
address these issues, findings are divergent. In high-
income countries, the mental well-being effects of winning
the lottery—a dramatic, exogenous shock to material cir-
cumstances—range from positive to negative (Apouey and
Clark 2015; Brickman, Coates, and Janoff-Bulman 1978;
Gardner and Oswald 2007; Lindqvist, Östling, and Cesarini
2020; Raschke 2019).1 Other types of random shocks also
seem to have mixed effects: Recent meta-analyses of ran-
domized experiments and government welfare programs
report wide-ranging findings, with the average income
effect being quite small (Ridley et al. 2020; Thomson et al.
2022). One recent experiment entailing cash transfers finds
no meaningful effects (Courtin et al. 2018), while another
finds that such transfers were detrimental to psychological
well-being (Jaroszewicz et al. 2022). On the other hand,
1
Effect sizes are not reported in comparable units across all stud-
ies. This article reports estimates in units of standard deviation/unit
change in log income. In comparable units, Lindqvist, Östling, and
Cesarini (2020) found an effect of approximately .18 (p > .05) on
the General Health Questionnaire-12 index (higher values indicate
improved well-being).
1
Stanford University, Stanford, CA, USA
Corresponding Author:
Tamkinat Rauf, Department of Sociology, University of Wisconsin-
Madison, 1180 Observatory Drive, Madison, WI 53706, USA.
Email: trauf@wisc.edu

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2 Socius: Sociological Research for a Dynamic World 
there are specific cases where U.S. policies do appear to
have a positive mental health effect among socioeconomi-
cally disadvantaged populations, such as among beneficia-
ries of poverty-alleviation programs (Boyd-Swan et al.
2016; Shields-Zeeman et al. 2021) and among less edu-
cated older adults benefiting from changes to retirement
income policies (Golberstein 2015). However, we cannot
extrapolate whether these effects generalize to the broader
population. In addition, given the varying strength of the
association between income and mental well-being over
the life course (Cheung and Lucas 2015; Miech and
Shanahan 2000), it is possible that the causal effect of
income is heterogeneous across stages of adulthood.
Studies comparing siblings also report divergent findings:
One U.S. study found no income effects on psychological
distress within monozygotic twins or siblings (Schnittker
2008), whereas twin studies in China (Li et al. 2014) and
Australia (Lam et al. 2019) have reported positive effects
on affective well-being and decline in psychological dis-
tress, respectively. In general, prior estimates from designs
intended to identify causal effects have been smaller than
measures of association, suggesting that the latter are
inflated.
This article advances our understanding of the relation-
ship between income and mental well-being by addressing
some key limitations of previous associational and causal
studies. First, I use longitudinal measures to assess the extent
of bias in the income-depression gradient due to measure-
ment errors in income. Second, I leverage genetic indices to
address reverse causation and other sources of confound-
ing—an approach that, while not free of limitations, does not
suffer from the same kinds of biases as previous causal stud-
ies. Specifically, unlike government policies or windfall
gains that may abruptly affect life chances in adulthood,
genes shape the risk of “exposure” throughout the life course.
And in contrast to family studies, the use of genetic indices
does not rely on comparing socially related individuals.
Finally, to assess if the effects of income vary with age, I
examine this relationship in samples representing three dis-
tinct stages of adulthood.
Background
Potential Casual Mechanisms Linking Income to
Mental Well-Being
Pathways through which socioeconomic conditions impact
mental health have been extensively discussed in the litera-
ture (e.g., McLeod 2013; Muntaner, Borrell, and Chung 2007;
Patel et al. 2018). Here, I concisely review the key theorized
mechanisms. First, affluence can generate positive life condi-
tions that mitigate negative feelings, such as stress, anxiety,
loneliness, and sadness. For example, income reduces the risk
of illness and mortality (Chetty et al. 2016; Strully 2009),
increases selection into marriage (Killewald and Lundberg
2017; Ludwig and Brüderl 2018), and improves the stability
and quality of romantic partnerships (Karney 2021). Second,
richer individuals are at lower risk of experiencing adverse
life events that can “provoke” depression, such as the death of
a loved one or exposure to violence (Businelle et al. 2014;
Levitt 1999; McLeod and Kessler 1990). Third, affluence
increases people’s sense of control over their environment,
which in turn improves well-being (Kraus, Piff, and Keltner
2009; Ross and Mirowsky 1992). Fourth, economic segrega-
tion can widen the gap in the availability and quality of shared
public resources in rich and poor neighborhoods, amplifying
income-based disparities in quality of life and hence in men-
tal well-being (King and Ogle 2014; Marmot 2002). A final
potential mechanism pertains to relative income: Having a
low income rank (i.e., having less income relative to others
within a region or social group) can decrease well-being via
processes of stressful upward comparisons (Alderson and
Katz-Gerro 2016; Liao 2021; Van Deurzen, Van Ingen, and
Van Oorschot 2015).
Sources of Bias in the Income–Well-Being
Association
While a causal effect of income is highly plausible, treating
correlation or estimates from simple regression models as
causal effects can be subject to several biases. Some sources
of confounding can lead to overestimation, perhaps even
inducing spurious association where no causal relationship
exists. One source of spuriousness is reverse causation:
Previous depression dampens labor market prospects
(Dooley, Prause, and Ham-Rowbottom 2000; Fletcher 2013),
while higher mental well-being predicts greater productivity
and earnings (De Neve and Oswald 2012; Oswald, Proto,
and Sgroi 2015). Similarly, conditions that independently
harm both income and mental well-being can inflate ordi-
nary least squares (OLS) estimates. For example, poor physi-
cal health negatively impacts earning capability (Case,
Fertig, and Paxson 2005; Haas 2006) and mental well-being
(Steptoe 2019).
However, confounders that positively affect income but
negatively affect well-being, or vice versa, can lead to an
underestimation of a true causal effect. One possibility is
religiosity: Some suggest a negative effect of religiosity on
income (Gundlach and Opfinger 2013; Herzer and Strulik
2017), while others find that religiosity protects the well-
being of the poor through various proposed means: promot-
ing anti-wealth norms, facilitating feelings of existential
certainty, and psychologically buffering against adversities
(Berkessel et al. 2021; Ellison 1991; Hastings and Roeser
2020). Similarly, “other-oriented feelings” are typically
associated with both lower social class and higher mental
well-being (Piff and Moskowitz 2018). Conversely, longer
work hours (Sato, Kuroda, and Owan 2020) and basing self-
worth on financial success (Park, Ward, and Naragon-Gainey
2017) may result in higher income but worse mental health.
Rauf
In principle, one could address confounding by including
covariates. But in practice, this is challenging because con-
founders are not always observed, and those that are often have
complex relationships with income and mental well-being. For
example, marital status can sometimes influence income (e.g.,
by influencing duration of unemployment; Jacob and Kleinert
2014), but income also affects selection into marriage (Killewald
and Lundberg 2017). Similarly, while physical health may con-
fer an earning advantage, income also affects health.
Conditioning on such variables can bias the estimated income
effect (Angrist and Pischke 2008:47–51). As such, without
exogenous income variation, it is not possible to satisfactorily
address confounding or even assess the net direction of bias.
A different source of underestimation is the reliance of
prior research on current income, which is more likely to be
measured with error compared to average long-term income,
or permanent income. Nonsystematic measurement error in
the explanatory variable can bias OLS estimates toward
attenuation (Griliches 1977), and some research suggests
that measurement errors might shrink the OLS coefficient of
income by over 50 percent (Hanandita and Tampubolon
2014; Powdthavee 2010). Individuals’ current incomes may
also depart from their stable trajectories due to temporary
shocks, such as unemployment or windfalls. Given that indi-
viduals adjust behaviors to temporally distribute the impact
of shocks (Diebold and Rudebusch 1991; Hendren 2017),
random shocks may be construed as a source of noise with
respect to the “true” effect of income.
Limitations of Prior Causal Designs
Given the foregoing issues with using simple observational
data to estimate the effect of income on mental well-being,
other approaches have been pursued. Two of the most influ-
ential are looking at people who have had random shocks to
their income (e.g., lottery winners or beneficiaries of new
government policies) and using study designs that incorpo-
rate family relatedness (e.g., twins). While these designs
have provided valuable contributions in other domains,
extending them to investigate income effects on mental well-
being runs into particular challenges.
Estimates based on random shocks to adult income often
capture only a narrow set of ways in which income affects
mental health. The theorized effects of income at least par-
tially operate through some mechanisms related to class,
including conditioning of dispositions through sustained
exposure to certain living conditions and social environ-
ments (Bourdieu 1979:101; Freese 2017) and having a par-
ticular set of available choices at given points in the life
course that in turn influence future life events (Elder 1994,
1998). Income shocks may not readily influence mecha-
nisms that operate through social networks or cumulative
exposures that accompany anticipated income trajectories.
As an example, winning the lottery does not improve physi-
cal health (Apouey and Clark 2015; Cesarini et al. 2016;
3
Raschke 2019)—a determinant of mental well-being—even
as upwardly mobile individuals may achieve mental and
physical health levels comparable to those with stable high
incomes (Frech and Damaske 2019; Luo and Waite 2005;
Pudrovska and Anikputa 2014). Broadly, this critique
implies that random shocks to adult income will necessarily
produce smaller effects than would result from extended,
cumulative, and anticipated income exposure. On the other
hand, unanticipated affluence can have consequences that
do not necessarily accompany stably high or upward income
trajectories. For instance, windfalls can have socioemo-
tional fallouts, including overwhelming financial demands
from nonhousehold members and feeling lack of accom-
plishment in everyday tasks (Jaroszewicz et al. 2022;
Raschke 2019), and may also affect relationship outcomes
in unexpected ways, such as decreasing the risk of marriage
among women and that of separation among married men
(Boertien 2012; Hankins and Hoekstra 2011).
Other studies have exploited genetic similarities between
twins to examine how a difference in income among other-
wise comparable individuals impacts psychological well-
being. Because the source of causal identification is the
income difference between two related individuals, it is worth
considering how relatedness might matter. In general, well-
being is particularly sensitive to relative status with respect to
one’s reference group (Alderson and Katz-Gerro 2016; Liao
2021). Social comparison between twins often tends to be
horizontal, that is, motivated by feelings of solidarity and
communion rather than status competition (Huguet et al.
2017; Segal 1988; Segal and Hershberger 1999). Consistent
with aversion for within-twin inequality, Li et al. (2014)
found that income differences within twin pairs have average
negative effects on the well-being of both siblings. In addi-
tion, greater resource transfers from parents toward the chil-
dren with more financial need may mitigate the impact of
income inequalities within siblings (McGarry 2016;
Zissimopoulos and Smith 2011). As such, this particular
research question may not wield itself to a family study design
if the siblings are not raised in independent yet otherwise
comparable environments. In addition, inferences based on
twin studies may not always be meaningful because of little
outcome variation, small samples, and unobserved environ-
mental differences (DiPrete, Burik, and Koellinger 2018).
Advancing Understanding of the Income-
Depression Link with New Data
This article makes three improvements to previous associa-
tional and causal studies. First, I use longitudinal data to com-
pute the income gradient with respect to permanent income,
which is averaged over multiple time points and is less affected
by measurement errors or temporary fluctuations from indi-
viduals’ stable income trajectories. Previous studies of other
subjective well-being indicators show that the association with
current income tends to be significantly weaker than with
4 Socius: Sociological Research for a Dynamic World 
permanent income (Bayer and Juessen 2015; D’Ambrosio,
Jäntti, and Lepinteur 2020; Luhmann, Schimmack, and Eid
2011). As such, we may expect that permanent income will
also be more strongly linked with depressive symptoms.
Second, to address reverse causation, I control for an index
predicting the genetic risk of depression (Freese 2018).
Because genes are assigned at birth, predate life events, and
are constant over the life course, causal arrows can only point
outward from genes to traits. In addition, conditional on our
parents’ genes, our own genes are randomly assigned at con-
ception. And while social environments are undoubtedly cen-
tral in shaping human lives, almost all socially important
outcomes are also at least “partially heritable” (Freese 2008).
Because of these properties, genetic measures can be usefully
leveraged to partition putatively random variation in predic-
tors and outcomes to help unpack how one might affect the
other. Previous genetic studies find high levels of heritability
in depression and mental well-being (Bartels 2015; Howard
et al. 2019), which could potentially result in a reverse causal
effect of depression on income. To the extent that reverse cau-
sation might be resolved by accounting for genetic influences
on the former, one can attempt to control for it using a predic-
tor of the genetic risk of depression.
Third, to address other sources of confounding, I use a
genetic predictor of educational attainment as an instrumen-
tal variable to estimate the causal effect of income (Bollen
2012; Imbens and Angrist 1994). In case of genetic mea-
sures, the methodology is often referred to as “Mendelian
randomization” (Davey Smith and Ebrahim 2003).2 While
this approach is not free of limitations (as I discuss exten-
sively in the following), it does not suffer from the same
sources of bias as previous causal designs. Specifically,
unlike studies of unanticipated income shocks or policies
that affect people abruptly in adulthood, genetic influences
impact income via sustained exposures over the life span.
And in contrast to family studies, analyses using genetic
influences are not constrained to comparisons of related indi-
viduals. Previous research has fruitfully applied similar ana-
lytical approaches to apprehend causal mechanisms
underlying other social phenomena, such as educational out-
comes (Hughes et al. 2021), income (Wang et al. 2020), and
self-harm behavior (Lim et al. 2020).
The Income–Well-Being Link over the Life Course
Over the adult life course, the strength of the income-depres-
sion link may vary as money may “buy” well-being for differ-
ent reasons. One possibility is that income effects may grow
with age. During middle adulthood, higher earnings may
accompany work-related anxiety and stress and longer work
2
The term alludes to Mendel’s second law of random assortment:
The inheritance of one trait does not depend on that of another
(Davey Smith and Ebrahim 2003).
hours, diminishing the net effect of money on well-being.
However, extended exposure to a high income during the adult
life span may lead to accumulated advantages of money in
older age, such as better physical health and positive relation-
ships. Affluence also contributes more to financial satisfaction
in older age, but it may not equally ameliorate financial wor-
ries earlier in life (Plagnol 2011). Indeed, previous research
does suggest that the income-depression association increases
with age (Miech and Shanahan 2000). However, it is also pos-
sible for the causal effect of money to diminish with age. For
example, income is more strongly associated with life satisfac-
tion in middle adulthood than later in life (Cheung and Lucas
2015), which could suggest that people perhaps become less
concerned with material status as they grow older.
To test how the income effect changes over the adult life
span, I examine three adult life stages: early midlife (early 30s
to mid-40s), late midlife (50–64), and older adulthood (65–85).3
These age groups roughly map on to stages of adulthood defined
in previous research (Cherlin 2010; Erikson 1968) and mark
key differences in life course stages. The youngest age group
represents primary working years (Gangl 2005) and a time
when many people are undergoing important family transitions,
such as first marriage and parenthood (Arnett 2012).4 The oldest
group is lower bounded by the normative retirement age; maxi-
mum age is bounded to limit survival bias in this group.
Data and Measures
I use data from two large, nationally representative panel data
sets, the National Longitudinal Study of Adolescent to Adult
Health (Add Health) and the Health and Retirement Study
(HRS; 2021). Add Health began as a sample of U.S. adoles-
cents in Grades 7 to 12 in 1994–1995 and includes supple-
mental oversamples for underrepresented groups (Harris and
Udry 2018). To date, five interview waves have been col-
lected, with the last two waves being roughly 10 years apart;
the five-wave design encompasses 12,300 individuals. The
HRS represents U.S. adults age 50 years and older and has
been conducted biennially since 1992, with new birth cohorts
being added every 6 years. In 2018, there were about 21,000
respondents. Both surveys have collected salivary DNA sam-
ples and genotyped most of their respondents. Available
genetic indices are derived from genome-wide association
studies (GWASs) of European-ancestry individuals and may
not transfer well to other ancestries (Martin et al. 2019). As
such, these analyses are restricted to individuals with
3
I do not examine adults under age 30 because during this period
of “emerging adulthood,” reported incomes may not necessarily
reflect actual living conditions due to high prevalence of financial
dependence on parents (Arnett 2012).
4
Arnett (2012) proposed the term “young adulthood” for 30s to
mid-40s. Others, however, argue that this label should strictly
be used for ages 18 to 25 (Society for Adolescent Health and
Medicine 2017).
Rauf
Table 1. Summary Statistics of Analytic Samples.
Early Midlife
Age (average years)
Women (proportion)
Years of education (average)
Household income (in thousands, 2020 $, average)
Depressive symptoms (rescaled 1–10, average)
Birth year (range)
Survey year (range)
N (cases)
Sources: National Longitudinal Study of Adolescent to Adult Health and Health and Retirement Study.
Note: Weighted averages reported. Age and survey year correspond to the wave when depressive symptoms were recorded. All samples are restricted to
individuals with European ancestry.
genotypes indicative of European ancestry (5,731 Add Health
and 12,090 HRS respondents).
The early midlife sample includes Add Health respon-
dents in Wave 5 (ages 33–44), the late midlife sample
includes HRS respondents ages 50 to 64, and the older adults
sample includes HRS respondents age 65+.5 Table 1
describes the estimation samples. Sampling weights corre-
sponding to the respondents’ last period of observation are
used to obtain parameters representative of underlying popu-
lations. Because the HRS includes partners of married
respondents, standard errors are clustered by household.
Depressive Symptoms
Measures of depressive symptoms (DS) are based on abbrevi-
ated versions of the Center for Epidemiologic Studies
Depression (CES-D) scale (Radloff 1977). Abbreviated ver-
sions of this scale were administered in Add Health (a five-
item version) and HRS (an eight-item, dichotomous-response
version). These indices have been validated in prior studies
and share psychometric properties with the full CES-D
(Perreira et al. 2005; Turvey, Wallace, and Herzog 1999). Both
indices have good internal consistency in the analytic samples
(α = 0.81 in Add Health and α = 0.78 in HRS). Outcomes are
standardized to create z scores comparable across samples.
Income
Both data sets reported pretax household income. In Add
Health, income excludes government transfers and is mea-
sured on a categorical scale. Income was transformed into a
continuous measure using midpoint approximation; for the
highest income bin, income is approximated at 33 percent
above the lower bound. Income in HRS includes government
transfers (Bugliari et al. 2021). I bottom-coded household
5
Nursing home residents are excluded because the HRS target pop-
ulation is noninstitutionalized adults, and so, while these partici-
pants are interviewed, they are not assigned a sample weight.
5
Late Midlife Older Adults
37.27 60.48 71.93
0.50 0.54 0.56
14.51 13.93 13.33
98.81 129.72 84.44
2.12 2.45 2.39
1974–1983 1935–1959 1916–1949
2015–2017 2000–2019 2000–2019
3,832 6,393 7,727
income at $500. Current income corresponds to Wave 5 in
Add Health and the last wave in the HRS analytical sample.
Permanent income in Add Health is averaged over Waves 4
and 5 (about 10 years), and in HRS, it is averaged over three
consecutive waves (roughly 5 years)—this corresponds to
approximations used in previous research (e.g., D’Ambrosio
et al. 2020; Gangl 2005).6 Income measures are adjusted for
inflation using implicit price deflator indexed for 2020.
The relationship between income and various indicators
of mental well-being tends to follow a log-linear pattern
(e.g., Stevenson and Wolfers 2013; Zimmerman and Katon
2005), indicating that the marginal effect of an absolute
increase in income diminishes with the level of income. This
pattern is also reflected in the samples used in this study (dis-
cussed further in the results section). As such, I use logged
measures of both current and permanent income. The gradi-
ent with respect to log income reflects the average effect of a
percentage change in income.
Polygenic Predictors
Most traits are understood to be polygenic, that is, affected by
multiple genetic variants (McCarthy et al. 2008). To identify the
causal genetic variants, GWASs are conducted in large samples,
which entail estimating regressions of the trait of interest on
each variant, typically a single nucleotide polymorphism (SNP;
for a succinct primer, see Conley 2016). GWASs are estimated
within ancestrally homogeneous populations and control for
gender, age, and principal components of genetic ancestry that
adjust for population stratification within ancestral groups.7 The
6
Posttax and transfer household income averaged over 2 to 5 years
explains majority of the variation in permanent income measured
over 20+ years (Brady et al. 2018).
7
Even within racially homogeneous groups, there may be system-
atic historical differences in exposures due to assortative mating,
residential sorting, or social distance based on ethnicity or lan-
guage, and so on. Including the principal components of genetic
ancestry controls for such sources of spurious correlation.
6 Socius: Sociological Research for a Dynamic World 
GWAS yields summary statistics, comprising of a separate
regression coefficient for each SNP, which are used as weights
to construct polygenic indices (PGIs), as follows:
k While the aformentioned models address biases due to
PGI = ∑ β SNP ,
i j ij
j =1
where i indexes individuals and j indexes the frequency of the
less frequent (“minor”) allele on the jth SNP. βj is the coeffi-
cient of the effect of SNPj on the trait. To avoid overfitting,
the sample for which a PGI is constructed is not part of the
data set on which the GWAS is based. The PGIs are standard-
ized to have mean of 0 and variance of 1 within each sample.
PGIs used in this study are derived from analyses by Becker
et al. (2021). These PGIs are based on multitrait analysis of
GWAS, which leverages shared genetic variance between phe-
notypes to enhance the predictive power of any given PGI
(Turley et al. 2018). I use a PGI of DS as a genetic control and
a PGI of educational attainment (EA) as an instrument for
income. The EA-PGI can affect income through a number of
socially mediated pathways, including, most directly, via edu-
cational attainment and through potential indirect pathways,
including occupational aspirations, financial savvy, and selec-
tion of a spouse with high socioeconomic status (SES; Barban
et al. 2021; Barth, Papageorge, and Thom 2019; Belsky et al.
2016, 2018). Assumptions entailed in using the PGI as an
instrumental variable are discussed in the following section.
Analytic Strategy
The analytic strategy is twofold. First, I estimate the baseline
OLS, which is consistent with previous associational studies
(Model 1). I then make two adjustments to the baseline
model. In Model 2, I use permanent instead of current income
to assess the extent of attenuation bias induced by noise in
income measurement. Model 3 includes a control for the
depression-PGI, which will help assess the extent to which
reverse causation (attributable to genetic risk of depression)
is responsible for inflating the income-depression gradient.
The OLS models are specified as follows:
DS = β .Income + X δ + ε (1),
i OLS i i i tion is “horizontal pleiotropy,” which is induced when the
where i indexes individuals, X is a vector of covariates, and
the coefficient β estimates the income effect conditional on X.
The standard set of covariates across models includes the first
10 principal components of genetic ancestry, gender, and age
(Burgess et al. 2019). HRS analyses also include period fixed
effects to adjust for variation in timing of data collection. For
reasons discussed earlier, I do not control for variables that
could be affected by income (e.g., health or marital status).
It should be noted that estimates of the income coefficient
in Model 3 may be upwardly biased due to classical mea-
surement error in the depression-PGI, which gets incorpo-
rated in the computation of PGIs from GWAS summary
statistics (Becker et al. 2021). In turn, this noise can attenuate
the coefficient of the PGI and inflate that of income. Ancillary
analyses tested the sensitivity of these models to measure-
ment error and are discussed later.
measurement error and reverse causation, they do not address
omitted variable bias. As mentioned earlier, controlling for
omitted variables in this case is complicated by the fact that
some key sources of confounding (e.g., marital status and
health) also mediate the effects of income on mental health.
As such, a different strategy is needed to assess the effects of
income differences between individuals. I use two-stage
least squares (2SLS) regressions to estimate this effect
(Wooldridge 2010). In the first-stage equation, I use the
EA-PGI as an instrumental variable for income to predict the
proportion of income that, net of covariates, is not caused by
factors that confound the income-depression relationship.
The predicted values of income from this model are then
used to estimate the income effect in the second stage. The
2SLS model is specified as follows:
Incomei = γ.PGIeai + Xi ∅ + w i
� (2).
DSi = β2 SLS .Incomei + Xi δ + εi
These regressions are estimated using the ivreg2 program in
Stata (Baum, Schaffer, and Stillman 2010).
Two important assumptions are built into the baseline
2SLS model. First, the EA-PGI needs to be a significant and
strong predictor of income. The violation of this assumption
can result in “weak instrument bias,” which could exaggerate
β estimates (Staiger and Stock 1997). As such, I first
2SLS
test that the instrument is relevant and strong by comparing
F statistics from the first-stage regression with critical values
from the Stock-Yogo test for a true rejection rate of 5 percent
and a maximum tolerated rejection rate of 10 percent (Stock
and Yogo 2005).
The second assumption is that there is no path from the
EA-PGI to DS that is unmediated by income, also known as
the “exclusion restriction” (Wooldridge 2010:91–92). It fol-
lows from this assumption that conditional on income and
covariates, the EA-PGI should be randomly distributed with
respect to DS. One potential source of violation of this condi-
same parts of the genome predict both the outcome and
explanatory variable (Paaby and Rockman 2013). Indeed,
the PGIs of EA and depression are significantly negatively
correlated in these estimation samples (in Add Health,
ρ = −.35, p < .001; in HRS, ρ = −.29, p < .001). To address
this, I estimate an adjusted 2SLS model controlling for the
depression-PGI (DiPrete et al. 2018).8 A second source of
8
The method proposed by DiPrete, Burik, and Koellinger (2018)
entails obtaining a PGI of the outcome conditional on the exposure.
In the absence of the conditional PGI, the authors suggest control-
ling for a PGI predicting the outcome.
Rauf
Figure 1. Relationship between depressive symptoms and income.
Sources: National Longitudinal Study of Adolescent to Adult Health and Health and Retirement Study.
Note: Lines are fitted using locally weighted scatterplot smoothing (Lowess).
violation is “genetic nurture”—that is, the indirect influence
of parents’ genes on a person’s mental well-being that is
transmitted via the rearing environment (Kong et al. 2018)—
which can induce a correlation between EA-PGI and depres-
sion. This concern is partly mitigated by controlling for
parental education (Hart, Little, and van Bergen 2021).9,10
Sample sizes for the adjusted 2SLS models are relatively
smaller due to missing parental education data.
Another assumption about the exclusion restriction is that
education and depressive symptoms are conditionally inde-
pendent. This assumption is supported by previous causal
research (Avendano, de Coulon, and Nafilyan 2020;
Dahmann and Schnitzlein 2019; Sperandei et al. 2023).
However, in ancillary analyses, I also test this assumption by
decomposing the causal education effect into income and
nonincome effects (Dippel et al. 2020). While this decompo-
sition method itself entails assumptions that may not be fully
satisfied, it provides at least some useful benchmarks for the
extent and direction of bias in β induced by a nonin-
2SLS
come effect of education. Supplement C provides full details
9
The ideal strategy to block this pathway is to control for parental
EA-PGIs (Barcellos, Carvalho, and Turley 2021). Parental PGIs
are not available in these data. Another potential alternative is fam-
ily fixed effects, however those estimates can be too conservative
(Trejo and Domingue 2018) and can be biased because siblings
influence each others’ environments.
10
Parental education is defined here as the average of the years of
education of both parents or the available parent. Including controls
for both parents separately does not meaningfully change the results
but reduces sample sizes due to missing data (Table S5).
7
of the method and analysis, and the results of the 2SLS mod-
els are discussed in light of the decomposition analysis.
Results
Using Permanent Income Instead of Current
Income
I begin by discussing patterns of association between DS and
logged income measures. Figure 1 depicts the income-depres-
sion gradient with respect to log of current and permanent
income in the three samples. Consistent with expectations
based on prior research, the gradient with respect to perma-
nent income is steeper across all three samples.
Results of OLS models are summarized in Figure 2. In
the baseline OLS model, current income gradients range
between −.2 and −.3 (full results in Table S1).11 The gra-
dients with respect to permanent income are larger, by .05
SD on average, suggesting that fluctuations or measure-
ment errors in current income are a potential source of
attenuation bias. For both current and permanent income,
coefficient estimates for older adults are significantly
smaller compared to estimates for adults in early and late
midlife.
11
One cannot compare these results directly to previous studies
because of differences in populations and outcomes. Stevenson
and Wolfers’s (2013) estimated average effect for positive affective
well-being, .67 SD/log income, provides the closest benchmark in
comparable units.
8 Socius: Sociological Research for a Dynamic World 

Figure 2. Ordinary least squares estimates of the income-depression gradient across adult life stages.
Sources: National Longitudinal Study of Adolescent to Adult Health and Health and Retirement Study.
Note: Nonoverlapping confidence intervals indicate significant differences between estimates at 5 percent level.

Adjusting for Genetic Risk of Depression
Across all three age groups, average DS between individ-
uals significantly vary by the depression-PGI (Figure 3).
This variation in mental health is reflecting influences
that rather than being caused by income, may conversely
influence income attainment. Indeed, when a control for
the depression-PGI is included in Model 3, estimates of
the standard OLS model shrink by about .01 SD (Figure 2
and Table S1). As mentioned earlier, these analyses may
underestimate reverse causation due to measurement error
in the DS-PGI (Becker et al. 2021). In ancillary analyses,
estimates adjusted for measurement error contract the
estimates of income effect by.02 SD on average (Table
S6). Again, estimates for older adulthood are substantially
smaller compared to earlier in the life course.
Two-Stage Least Squares Estimation of Causal
Income Effect
The 2SLS models assess the extent of bias in the income-
depression gradient resulting from factors in addition to
those discussed previously. The first-stage regression pre-
dicts the proportion of income that is in turn predicted by the
EA-PGI. Income differences between individuals signifi-
cantly vary by the EA-PGI across all three samples in both
the baseline models and models adjusted for depression-PGI
and parental SES (left panel in Figure 4). Across all first-
stage models, the EA-PGI has a significant coefficient, and
the first-stage F statistics are larger than critical value of
16.38 (Stock and Yogo 2005), indicating that the instrument
relevance condition is satisfied (Table S2).12
All estimates from the baseline 2SLS models are statisti-
cally significant (right panel in Figure 4 and Table S3) and
are comparable in magnitude to the gradient estimated from
OLS regressions. Because the confidence intervals of 2SLS
estimates are wider, differences between estimates for late
midlife and older adulthood are no longer distinguishable,
but early midlife estimates are significantly smaller than esti-
mates for older adulthood. As discussed earlier, baseline esti-
mates could be biased due to horizontal pleiotropy and
genetic nurture. The adjusted 2SLS model assesses the sensi-
tivity of estimates to these biases. In the adjusted model, esti-
mates remain significant for older adulthood and are
marginally significant for late midlife (p = .06) but are insig-
nificant for early midlife. In terms of magnitude, the adjusted
2SLS estimates for the two older age groups are comparable
to OLS coefficients, but estimates for early midlife are virtu-
ally zero. The consistency of estimates across baseline and
adjusted models suggests that income does have a causal
effect on depression in late midlife and older adulthood.
The 2SLS models also assume that net of income, education
does not directly affect DS. To assess how much the violation
of this assumption might bias 2SLS estimates, I conducted a
decomposition analysis assessing the effect of education on DS
via income and nonincome pathways (Figure 5 and Table S4).
12
I report Kleibergen-Paap rk Wald F statistic, which adjusts for
clustered standard errors (Baum, Schaffer, and Stillman 2010).
Rauf 9

Figure 3. Distribution of depressive symptoms by depression PGI.

Sources: National Longitudinal Study of Adolescent to Adult Health and Health and Retirement Study.
Note: Bars show weighted averages; 95 percent confidence intervals shown.

Figure 4. Two-stage least squares estimates of income effect on depressive symptoms.

Sources: National Longitudinal Study of Adolescent to Adult Health and Health and Retirement Study.
Note: Nonoverlapping confidence intervals indicate significant difference between estimates at 5 percent level.

In the baseline models, the total effect of education is negative,
with nearly all of the beneficial effect being driven via the
income effect; the nonincome effect is positive. In the adjusted
models, this pattern continues to hold for late midlife and older
adulthood (suggesting that the assumption of a negligible non-
income effect of the EA-PGI is largely valid and results in only
a small amount of downward bias in the 2SLS estimates).
However, income effect is reversed in the early midlife sample
when additional covariates are included, indicating that the
exclusion restriction is strongly violated for this sample.
Ancillary analyses show that the direction of income effect in
early midlife specifically flips when parental education is
included in the model. A potential reason may be that parental
SES is more strongly correlated with household income in
early midlife than at later ages (e.g., in Wave 5, about 8 percent
of Add Health participants lived with their parents, and 11 per-
cent received large financial transfers from parents and other
relatives).
A final concern is that the EA-PGI only captures income
variation via pathways affected by the PGI. Income can of
10
Figure 5. Decomposition of effect of education on depressive symptoms.
Sources: National Longitudinal Study of Adolescent to Adult Health and Health and Retirement Study.
course also vary due to other reasons, and in turn, these alter-
native pathways to a higher income can have distinct impli-
cations for mental well-being. More generally, the concern is
that 2SLS estimates reflect local average treatment effects
based on “compliers,” who may differ from the sample aver-
age (Card 2001; Imbens and Angrist 1994). Ancillary analy-
ses approximating the profile of compliers (using an approach
outlined by Marbach and Hangartner 2020) indicate that
compliers were largely similar to the full sample in terms of
class background, gender, birth cohort, and depression PGI
(Figures S1–S3).
Discussion
Social scientists have long documented a negative gradient
between income and mental health, but whether this correlation
reflects a causal effect has been an open question. Indeed, sev-
eral previous causal studies have reported small, null, and even
negative mental health effects. This study assessed this prob-
lem from a different vantage using data and methods different
from those employed in previous literature. Results suggested
that measurement errors in income and reverse causation due to
the genetic risk of depression are meaningful sources of bias,
acting in opposite directions. In models estimating putatively
causal effects of income, the effect sizes were as large as the
income-depression gradient for adults age 50 and older. For the
early midlife sample, the more stringent assumptions of the
causal model were not satisfied, but estimates from the less
stringent model aligned with those for older adults. Age differ-
ences in estimates—while present—were relatively small and
inconsistent in direction across OLS and 2SLS regressions.
Key limitations of these analyses include the following.
Because genetic data are not representative of underlying
populations at all levels of data collection, we cannot directly
use PGIs derived from European ancestry populations in
non-European ancestry samples with reasonable confidence.
Socius: Sociological Research for a Dynamic World 
While using permanent income is an improvement over prior
literature, these estimates are averaged across heterogeneous
adult income trajectories (Frech and Damaske 2019; Song
et al. 2022), which is a residual source of noise. A shortcom-
ing shared with prior literature is that the income measures
are not fully adjusted for fiscal transfers. Fiscally adjusted
income distributions tend to be less unequal (Brady et al.
2018), which could have implications for these results.
Finally, the exclusion restriction for the 2SLS estimator was
not fully satisfied across samples, being strongly violated in
the early midlife sample.
This article makes two contributions to the understanding
of the income-depression link. First, improvements to the
associational model allow adjudging the extent to which
two major known sources of bias might be affecting esti-
mates of the income–well-being gradient. The fact that this
gradient only marginally changed due to these corrections—
and the biases acted in opposite directions—suggests that
these are perhaps not the most worrisome sources of bias.
Second, the putative causal effect of income was estimated
using an approach that—while not free of limitations—does
not suffer from the same shortcomings as previous causal
designs. Specifically, it was an improvement over previous
studies using natural experiments or policy changes that
typically capture short-term and narrow effects of income
shocks and family studies where within-family effects do
not readily generalize to unrelated individuals. Pooled
across samples and models, the results presented here are
suggestive of an average beneficial causal effect of income
on mental well-being.
Authors’ Note
Replication files are available at https://osf.io/grjs9/. Add Health
restricted-use data can be requested at: https://data.cpc.unc.edu/
projects/2/view. HRS data are publicly-accessible at: https://hrs.isr.
umich.edu/data-products.
Rauf
Funding
The author(s) disclosed receipt of the following financial support
for the research, authorship, and/or publication of this article: The
article uses data from the Health and Retirement Study, which is
conducted by the University of Michigan and is sponsored by the
National Institute on Aging (NIA U01AG009740), and the National
Longitudinal Study of Adolescent to Adult Health, which is con-
ducted by the University of North Carolina at Chapel Hill and is
sponsored by the National Institute on Aging (NIA U01AG071448
and U01AG071450). This research was supported by the Stanford
Sociology Research Opportunity Grant and a dissertation fellow-
ship by the Stanford Institute for Research in the Social Sciences.
ORCID iD
Tamkinat Rauf https://orcid.org/0000-0001-8900-3432
Supplemental Material
Supplemental material for this article is available online.
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Author Biography
Tamkinat Rauf is a post-doctoral fellow and an incoming assistant
professor in the Department of Sociology at the University of
Wisconsin-Madison. Her research examines how social, economic,
political, and biological factors jointly influence various aspects of
human well-being, including mental and physical health.