The Psychological Costs of the COVID-19 Pandemic and Heterogeneous Effects in South Korea: Evidence from a Difference-in-Differences Analysis

This study estimates the effects of the COVID-19 pandemic on life satisfaction and stress and examines whether these effects vary across different sociodemographic groups using a nationally representative sample in South Korea. We estimate the causal effects of COVID-19 on psychological well-being by exploiting regional variation in the spread of the pandemic in South Korea. While the number of confirmed cases was very small in other provinces in the first half of 2020, the coronavirus spread rapidly in Daegu after an outbreak in one church. We employ a difference-in-differences approach that compares changes in people’s life satisfaction and stress before-and-after the initial surge of COVID-19 cases in Daegu and other provinces. Our results show that the proportion of people who are dissatisfied with life increased by 2.8–6.5 percentage points more in Daegu than in other provinces after the COVID-19 outbreak. During the same period, the proportion of people who reported feeling stressed increased more in Daegu than in other provinces by 5.8–8.9 percentage points. Our results also suggest that the negative impact of the COVID-19 outbreak on psychological well-being is significantly greater for men, young adults, middle-aged adults, self-employed workers, and middle-income individuals. On the other hand, the proportion of people who report feeling stressed among the highest-educated (a master’s degree or higher) and high-income individuals decreased after the onset of the COVID-19 outbreak.