11271 Psychological Barriers to Participationin the Labor Market Evidence from Rural Ghana Leandro CarvalhoDamien de WalqueCrick LundHeather SchofieldVincent SomvilleJingyao Wei Development EconomicsDevelopment Research GroupDecember 2025 A verified reproducibility package for this paper isavailable athttp://reproducibility.worldbank.org,clickherefor direct access. Policy Research Working Paper11271 Abstract Mental health conditions are strongly associated withreduced labor market participation, but the underlyingchannels through which such conditions impact laborsupply remain unclear. This paper reports on a two-phasestudy decomposing this relationship by examining (i) jobtake-up decisions; (ii) labor supply, output, and earningconditional on job take-up; and (iii) quit rates. In Phase1, women in rural Ghana were asked whether they wouldbe willing to take up a cash-for-work job during the leanseason when alternative work is scarce. The findings showthat individuals with depression and anxiety, which arecommon in this population, are much more likely to declinework offers outside the home but equally likely to accept work-from-home positions. In Phase 2, jobs at home wererandomly offered to those who were willing to work fromhome, avoiding selection effects. Neither depression noranxiety predicted work completion, income, or quit rates.These findings suggest that poor mental health may harmlabor market outcomes in traditional jobs outside the homevia reduced take-up, above and beyond the established neg-ative impacts of mental health on productivity in workoutside the home. The results also suggest an alternativeapproach to improving labor market outcomes for those inpoor mental health: work-from-home opportunities, whichare not associated with lower take-up or lower productivityon the job for those in poor mental health. This paper is a product of the Development Research Group, Development Economics. It is part of a larger effort by theWorld Bank to provide open access to its research and make a contribution to development policy discussions aroundthe world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp. The authorsmay be contacted at lcarvalh@usc.edu, ddewalque@worldbank.org, crick.lund@kcl.ac.uk, heather.schofield@gmail.com,vincent.somville@nhh.no, and jingyao.wei@nhh.no. A verified reproducibility package for this paper is available athttp://reproducibility.worldbank.org, clickherefor direct access. The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about developmentissues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry thenames of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely thoseof the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank andits affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. PsychologicalBarrierstoParticipationintheLaborMarket:EvidencefromRuralGhana LeandroCarvalho,DamiendeWalque,CrickLund,HeatherSchofield,VincentSomvilleandJingyaoWei∗† JELcodes:I15,J22,O15.Keywords:MentalHealth,Depression,Anxiety,LaborForceParticipation,Work-from-home,Women. †Carvalho: University of Southern California, de Walque: Development Research Group, The WorldBank, Lund: King’s College London, Schofield: Cornell University, Somville and Wei: Department ofEconomics, NHH Norwegian School of Economics. 1Introduction Poor mental health is prevalent in low-income populations around the world and hasbeen associated with low labor supply and earnings, creating the potential for negativefeedback loops which may perpetuate poverty (Barker et al., 2022; Biasi et al., 2021;de Quidt and Haushofer, 2016; Fuhr et al., 2019; Hakulinen et al., 2019; Lund et al.,2024; Mojtabai et al., 2015; Patel et al., 2011; Ridley et al., 2020; Weobong et al., 2017;World Health Organization, 2022b).While treating mental illness can have significantpositive impacts on labor supply, these effects are not universal, with more muted ornull results among some populations (Angelucci and Bennett, 2024; Baranov et al., 2020;Barker et al., 2022; Bhat et al., 2022; Lund et al., 2024; Patel and Kleinman, 2003; Patelet al., 2017). These mixed results may have many potential drivers and relatively little is knownabout the channels through which poor mental health reduces labor supply and income.In order to better understand how mental health conditions affect these important out-comes and begin to develop policy solutions, we decompose the process and study threeof its key components: (i) job take-up; (ii) labor supply, output, and earnings conditionalon job take-up; and (iii) quit rates. To accomplish this goal,