Environmental disasters and mental health: Evidence from oil spills in the Peruvian Amazon

Using a difference‐in‐difference approach, we test the causal link between environmental disasters and mental health indicators in rural areas of Peru by exploiting the spatial variation in exogenous oil spills and the differences in their timing for the period 2014 to 2018. We find that, after controlling for time‐varying controls and year fixed effects, oil spills lead to a significantly higher probability of suffering psychological distress. We also explore likely mechanisms that explain this causal impact. Finally, we present an event study and apply robustness tests that further support our findings.