The psychological toll of life shocks: evidence from Ethiopia

Freund, Richard

The psychological toll of life shocks: evidence from Ethiopia

Thesis / Dissertation

2026

Publisher

University of Cape Town

Department

School of Economics

Faculty

Faculty of Commerce

Abstract

Young people in low- and middle-income countries (LMICs) are coming of age amid economic, environmental, and social crises. At the same time, there is growing recognition of the role an individual's psychological state plays in shaping their socioeconomic and developmental outcomes. It is, therefore, critical to understand whether, how, and through what channels unexpected negative shocks affect young people's psychological state. In the substantive chapters of this thesis, I utilise data from Young Lives to explore the psychological effects of exposure to various adverse life events in Ethiopia, a low-income country. The first empirical chapter leverages a natural experiment – the 2021 drought – to assess the impact of drought exposure on young adults' experiences of anxiety and depression. My analysis applies a difference-in-differences strategy and couples rainfall data with longitudinal survey data on mental health. Results contribute evidence on how rainfall variability might perpetuate a psychological poverty trap and help identify populations most in need of support during periods of low rainfall. In the second substantive chapter, I investigate the effects of exposure to violent conflict during Ethiopia's recent civil war on young adults' trust. By employing novel individual-level conflict data collected via audio computer-assisted self-interviewing technology, my analysis helps reconcile contradictory findings in the existing literature. It underscores the importance of considering the resilience of social networks in post-conflict settings. In my third contribution, I explore the associations between the Productive Safety Net Programme (PSNP) and the development of foundational cognitive skills. My findings highlight mechanisms through which the PSNP may positively influence cognitive development, focusing on its effectiveness in mitigating nutritional deficits caused by early- life rainfall shocks. A connecting contribution of these chapters is to provide empirical evidence, through rigorous economic analysis, that builds an understanding of whether and how negative life shocks may impact the psychological state of young people in LMICs. This evidence can be inserted into dialogues that shape policy responses in the aftermath of such events, which ultimately have the potential to disrupt psychological and socio-economic inequities. Although concerning different facets of the psychological state, all chapters contribute to quantifying the psychological effects of exposure to negative shocks in ways that have not previously been explored in-depth in similar contexts.