Finn Tarp

We examine the effects of income uncertainty on mental health in Vietnam. We assess this issue using volatility in the price of coffee, a key export commodity, that exposes small coffee farmers to income uncertainty. Using household panel data collected over 2016–2020, we find an increase in volatility of the international coffee price to be positively associated with psychological distress among coffee farmers. The magnitude is greater for men, and the findings are robust to several checks. These results are further substantiated by corresponding estimates for related health measures and self‐reported happiness. Channels include an increase in mental stress due to pessimistic expectations of future economic well‐being, increased cognitive load and alcohol consumption, and reduced social capital. The results highlight the psychological toll of living with income uncertainty and provide support for the provision of social safety nets that protect farmers from frequent commodity price fluctuations.