Economic Layoffs and Mental Health: Evidence from French Register-Survey Data

This study examines the link between economic layoffs and employee mental health. We assess the effect of a recent economic layoff plan on the mental health of remaining permanent employees in a dual labor market. We rely on French survey data linked with register health insurance data to follow individual consumption of prescribed psychotropic drug before and after the event. We apply a difference-in-differences approach combined with coarsened exact matching. We find a significant increase in psychotropic drug consumption of employees after economic layoffs, compared to employees at a plants not implementing economic layoffs. Additional results show a negative association between economic layoffs and remaining employees? subjective mental health, using the Mental health index as an outcome. Furthermore, findings show that the size of the effects of economic layoffs on mental health are sizeable but suggest that these effects are of lesser importance compared to effects of other adverse life events (financial hardships and persistent lockdown experienced in the past) reported by workers.