While previous research demonstrates a significant negative relationship between post-traumatic stress disorder and earnings among adult veterans in the United States, a similar connection for children in developing nations has not been established. The literature indicates that both endogeneity and sample-selection biases are inherent in this relationship. This paper used ordinary least squares, two-stage least squares, Heckman selection, and instrumental variable Heckman selection models to progressively control for these biases, and is the first statistical analysis to explore the impact of psychological distress on the income and employment status of former child soldiers. Violence witnessed and feelings of helplessness during abduction were used as instruments for distress. The results indicate that distress significantly diminishes income but has no significant effect on employment status. This study helps to bridge the gap between psychological and economic research on former child soldiers by demonstrating that interventions focused on mental health that reduce psychological distress can positively impact income as well.

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