VoxEU Column Global crisis Health Economics

Health responses to the Great Recession in Iceland

Studies on the relationship between business cycles and health have come up with conflicting results. This column uses the case of Iceland’s economic collapse in 2008 to argue that the context and nature of macroeconomic fluctuations are key. Looking at the Icelandic business cycle in general suggests that hard economic times appear to be good for heart health, but the collapse, which was particularly dramatic and sudden, increased the incidence of ischemic heart disease. 

The relationship between business cycles and health is of interest to policymakers. Obviously, good and bad economic times have far-reaching consequences, of which health is only one limited factor. However, information on how economic fluctuations affect health can be important for the management of resources over the business cycle and the redirection of funds – for example, within health care and welfare systems – after significant shifts in aggregate economic conditions. 

The Icelandic economic collapse

The Icelandic economic collapse can almost be pinpointed to a specific date, namely, 6 October 2008 when the prime minister of Iceland announced the risk of national bankruptcy in a seminal address to the nation (The Prime Minister's Office 2008). Icelanders had previously seen their nation as one of the richest on earth, but were now told they were facing the possibility of national bankruptcy. This rapid and potentially catastrophic change in economic circumstances offers researchers an opportunity to examine the health and health-related effects of an economic crisis (e.g. Asgeirsdottir et al. 2013, 2016, Eiriksdottir et al. 2013, Hauksdottir et al. 2013, Jonsdottir and Asgeirsdottir 2014, Olafsdottir and Asgeirsdottir 2015, Olafsdottir et al. 2014). One lesson from the literature is that results appear to be driven to a great extent by contextual factors – factors that have not been given sufficient attention in prior research. Details of how health effects might vary according to the nature of the changes in the macroeconomy are largely unexplored. Conditions can be characterised by debt crises, financial crises, hits to the real economy, currency crises, and many more peculiarities that affect peoples’ lives very differently. Multiple characteristics of economic fluctuations can thus play an important role.

Business cycles and health

The literature on the relationship between business cycles and health dates back to the 1920s, when researchers found that economic expansions in the US and the UK were associated with increases in mortality rates (Ogburn and Thomas 1922, Thomas 1927). Not much of substance was added to this literature over the next few decades, but it received renewed impetus from Ruhm’s  (2000) article confirming that all-cause mortality increases in good economic times. Many studies on the subject have since followed with findings in line with those of Ruhm (Ariizumi and Schirle 2012, Gerdtham and Ruhm 2006, Tapia Granados 2005, Tapia Granados and Ionides 2017, van den Berg et al. 2017). However, conflicting results – i.e. that better health is associated with good economic conditions – have also been obtained (Economou et al. 2008; Gerdtham and Johannesson 2005, Svensson 2007, 2010). The reason for these different results is not clear, but context appears to matter and some general patterns are starting to emerge. The importance of identifying the potential heterogeneous effects of different types of economic fluctuations is highlighted in Birgisdottir et al. (2018). 

Our study

Studies examining Icelandic business cycles prior to the Great Recession have generally shown null effects or worsened heart health during times of increased economic activity (Birgisdottir and Asgeirsdottir 2017, Olafsdottir et al. 2016). However, this was not the case following the collapse of 2008. Asgeirsdottir et al. (2014), Birgisdottir et al. (2017) and Eiriksdottir et al. (2015) all find increased risk of hypertension following the economic collapse in different subpopulations (females, males, and pregnant women). Furthermore, data from the emergency departments in Iceland’s capital area indicate a considerable increase in cardiac emergency department attendance in the first week of the crisis (i.e. the week following the prime minister’s address to the nation) (Gudjonsdottir et al. 2012).  The seemingly contradictory results of studies examining the time prior to versus during the Great Recession are highlighted in our recent study (Birgisdottir et al. 2018), where both the general business cycle and the collapse of 2008 are examined and the same pattern of contradictory findings is confirmed for the entire adult population of Iceland. 

We use administrative data to assess whether the economic collapse in 2008 and subsequent economic crisis had an effect on the probability of ischemic heart disease (IHD) events, beyond general business cycle effects. Contrary to the typical findings in the business cycle literature, the results show that the sharp change in economic conditions in 2008 led to an increased probability of cardiovascular events in both males and females. In absolute terms these effects were small in magnitude but they were statistically significant, amounting to approximately 13-16 extra cases in each of the two years following the collapse for males and 3-5 extra cases per year for females. Hence, in practical terms it is very unlikely that the increased probability of an event placed a noticeable strain on the healthcare system in Iceland. This is perhaps not a surprising result when evaluated in the context of the stressful events literature. The Icelandic economic collapse was particularly dramatic and sudden, however, and the finding is not in line with the previous results from Iceland that indicate, if anything, better heart health in bad economic times. Results for the general business cycle effect are, however, in accordance with the previous literature, suggesting that hard economic times may actually be good for heart health. Thus different economic downturns may not just have differing effects in terms of magnitude, they may even have opposing effects. 

It is not unreasonable to associate this with the particular features that characterised the economic downturn that started in 2008 in Iceland, and to hypothesise that the speed and velocity of the economic changes created a shock effect. This highlights the importance of differences in the type of economic conditions at different times, even if they occur within the same social and institutional context. Some other recent evidence, albeit limited, has also suggested that large economic shocks may have effects that differ in relative size (although for the US in the same direction) from those of smaller shocks (Ruhm 2016).

Other results from Iceland also highlight the importance of different types of crises. For example, changes in consumption patterns in Iceland appear to be largely driven by price changes, which are a distinct result of Iceland being a small open economy with its own currency. That currency collapsed with the crash, resulting in substantial price changes that varied between goods depending, for example, on whether the final goods or inputs were imported or domestically produced (Asgeirsdottir et al. 2014). Thus the results from our recent study on cardiovascular health in Iceland (Birgisdottir et al. 2018) are not alone in indicating the importance of distinguishing between different types of economic fluctuations. 


The most noteworthy finding in our study is that the economic collapse and crisis increased the probability of ischemic heart disease events, independent of general business cycle effects. One lesson from the study is the importance of considering the nature of various changes in the business cycle. Health effects of macroeconomic fluctuations have, until now, been modelled in a rather crude way, while outcomes and pathways have been given greater consideration. Further research examining this issue in greater detail is certainly warranted.  


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