IDEAS home Printed from https://ideas.repec.org/p/jku/econwp/2020-26.html
   My bibliography  Save this paper

The health externalities of downsizing

Author

Listed:
  • Alexander Ahammer
  • Dominik Grübl
  • Rudolf Winter-Ebmer

Abstract

TWe show that downsizing has substantial externalities on the health of workers who remain in the firm. To this end, we study mass layoff (ML) survivors in Austria, using workers who survive a ML themselves, but a few years in the future, as a control group. Based on highquality administrative data, we find evidence that downsizing has persistent effects on mental and physical health, and that these effects can be explained by workers fearing for their own jobs. We also show that health externalities due to downsizing imply non-negligible cost for firms, and that wage cuts may have similar effects.

Suggested Citation

  • Alexander Ahammer & Dominik Grübl & Rudolf Winter-Ebmer, 2020. "The health externalities of downsizing," Economics working papers 2020-26, Department of Economics, Johannes Kepler University Linz, Austria.
    • Handle: RePEc:jku:econwp:2020-26
    Note: English
    as

    Download full text from publisher

    File URL: http://www.econ.jku.at/papers/2020/wp2026.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gerard J. van den Berg & Pia R. Pinger & Johannes Schoch, 2016. "Instrumental Variable Estimation of the Causal Effect of Hunger Early in Life on Health Later in Life," Economic Journal, Royal Economic Society, vol. 126(591), pages 465-506, March.
    2. Ichino, Andrea & Schwerdt, Guido & Winter-Ebmer, Rudolf & Zweimüller, Josef, 2017. "Too old to work, too young to retire?," The Journal of the Economics of Ageing, Elsevier, vol. 9(C), pages 14-29.
    3. Amy Finkelstein & Erzo F. P. Luttmer & Matthew J. Notowidigdo, 2009. "Approaches to Estimating the Health State Dependence of the Utility Function," American Economic Review, American Economic Association, vol. 99(2), pages 116-121, May.
    4. Reichert, Arndt R. & Tauchmann, Harald, 2017. "Workforce reduction, subjective job insecurity, and mental health," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 187-212.
    5. Alexander Ahammer & G. Thomas Horvath & Rudolf Winter-Ebmer, 2017. "The effect of income on mortality—new evidence for the absence of a causal link," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 180(3), pages 793-816, June.
    6. Hainmueller, Jens, 2012. "Entropy Balancing for Causal Effects: A Multivariate Reweighting Method to Produce Balanced Samples in Observational Studies," Political Analysis, Cambridge University Press, vol. 20(1), pages 25-46, January.
    7. Marcus, Jan, 2013. "The Effect of Unemployment on the Mental Health of Spouses – Evidence from plant closures in Germany," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 32(3), pages 546-558.
    8. Martin Halla & Julia Schmieder & Andrea Weber, 2020. "Job Displacement, Family Dynamics, and Spousal Labor Supply," American Economic Journal: Applied Economics, American Economic Association, vol. 12(4), pages 253-287, October.
    9. Sebastian Kube & Michel André Maréchal & Clemens Puppe, 2013. "Do Wage Cuts Damage Work Morale? Evidence From A Natural Field Experiment," Journal of the European Economic Association, European Economic Association, vol. 11(4), pages 853-870, August.
    10. Martin Huber & Michael Lechner & Conny Wunsch, 2011. "Does leaving welfare improve health? Evidence for Germany," Health Economics, John Wiley & Sons, Ltd., vol. 20(4), pages 484-504, April.
    11. Paul Contoyannis & Andrew M. Jones & Nigel Rice, 2004. "The dynamics of health in the British Household Panel Survey," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(4), pages 473-503.
    12. Ferrie, Jane E. & Shipley, Martin J. & Newman, Katherine & Stansfeld, Stephen A. & Marmot, Michael, 2005. "Self-reported job insecurity and health in the Whitehall II study: potential explanations of the relationship," Social Science & Medicine, Elsevier, vol. 60(7), pages 1593-1602, April.
    13. Ziebarth, Nicolas R. & Karlsson, Martin, 2010. "A natural experiment on sick pay cuts, sickness absence, and labor costs," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 1108-1122, December.
    14. Kamila Cygan‐Rehm & Daniel Kuehnle & Michael Oberfichtner, 2017. "Bounding the causal effect of unemployment on mental health: Nonparametric evidence from four countries," Health Economics, John Wiley & Sons, Ltd., vol. 26(12), pages 1844-1861, December.
    15. Pinheiro, Roberto & Visschers, Ludo, 2015. "Unemployment risk and wage differentials," Journal of Economic Theory, Elsevier, vol. 157(C), pages 397-424.
    16. Alexander Ahammer & Analisa Packham, 2020. "Dying to Work: Effects of Unemployment Insurance on Health," NBER Working Papers 27267, National Bureau of Economic Research, Inc.
    17. Kuhn, Andreas & Lalive, Rafael & Zweimüller, Josef, 2009. "The public health costs of job loss," Journal of Health Economics, Elsevier, vol. 28(6), pages 1099-1115, December.
    18. Christopher J. Ruhm, 2000. "Are Recessions Good for Your Health?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(2), pages 617-650.
    19. Daniel Sullivan & Till von Wachter, 2009. "Job Displacement and Mortality: An Analysis Using Administrative Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(3), pages 1265-1306.
    20. Pichler, Stefan & Ziebarth, Nicolas R., 2017. "The pros and cons of sick pay schemes: Testing for contagious presenteeism and noncontagious absenteeism behavior," Journal of Public Economics, Elsevier, vol. 156(C), pages 14-33.
    21. Østhus, Ståle & Mastekaasa, Arne, 2010. "The impact of downsizing on remaining workers' sickness absence," Social Science & Medicine, Elsevier, vol. 71(8), pages 1455-1462, October.
    22. Elena Cottini & Paolo Ghinetti, 2018. "Employment insecurity and employees' health in Denmark," Health Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 426-439, February.
    23. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-538, June.
    24. Marcus Eliason & Donald Storrie, 2009. "Does Job Loss Shorten Life?," Journal of Human Resources, University of Wisconsin Press, vol. 44(2).
    25. Timothy J. Halliday, 2008. "Heterogeneity, state dependence and health," Econometrics Journal, Royal Economic Society, vol. 11(3), pages 499-516, November.
    26. Olivier J. Blanchard & Jean Tirole, 2008. "The Joint Design of Unemployment Insurance and Employment Protection: A First Pass," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 45-77, March.
    27. Justin R. Pierce & Peter K. Schott, 2020. "Trade Liberalization and Mortality: Evidence from US Counties," American Economic Review: Insights, American Economic Association, vol. 2(1), pages 47-64, March.
    28. Hollingsworth, Alex & Ruhm, Christopher J. & Simon, Kosali, 2017. "Macroeconomic conditions and opioid abuse," Journal of Health Economics, Elsevier, vol. 56(C), pages 222-233.
    29. Alain Cohn & Ernst Fehr & Benedikt Herrmann & Frédéric Schneider, 2014. "Social Comparison And Effort Provision: Evidence From A Field Experiment," Journal of the European Economic Association, European Economic Association, vol. 12(4), pages 877-898, August.
    30. Arash Nekoei & Andrea Weber, 2017. "Does Extending Unemployment Benefits Improve Job Quality?," American Economic Review, American Economic Association, vol. 107(2), pages 527-561, February.
    31. Alexander Ahammer, 2018. "Physicians, sick leave certificates, and patients' subsequent employment outcomes," Health Economics, John Wiley & Sons, Ltd., vol. 27(6), pages 923-936, June.
    32. Stephen E. Snyder & William N. Evans, 2006. "The Effect of Income on Mortality: Evidence from the Social Security Notch," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 482-495, August.
    33. Browning, Martin & Heinesen, Eskil, 2012. "Effect of job loss due to plant closure on mortality and hospitalization," Journal of Health Economics, Elsevier, vol. 31(4), pages 599-616.
    34. Barry McCormick, 1990. "A Theory of Signalling During Job Search, Employment Efficiency, and "Stigmatised" Jobs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(2), pages 299-313.
    35. Schaller, Jessamyn & Stevens, Ann Huff, 2015. "Short-run effects of job loss on health conditions, health insurance, and health care utilization," Journal of Health Economics, Elsevier, vol. 43(C), pages 190-203.
    36. Schmidpeter, Bernhard, 2019. "Does stress shorten your life? Evidence from parental bereavement," Ruhr Economic Papers 834, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    37. David W. Johnston & Michael A. Shields & Agne Suziedelyte, 2020. "Macroeconomic Shocks, Job Security, and Health," American Journal of Health Economics, University of Chicago Press, vol. 6(3), pages 348-371.
    38. Kronenberg, Christoph & Boehnke, Jan R., 2019. "How did the 2008-11 financial crisis affect work-related common mental distress? Evidence from 393 workplaces in Great Britain," Economics & Human Biology, Elsevier, vol. 33(C), pages 193-200.
    39. Josef Zweim�ller & Rudolf Winter-Ebmer & Rafael Lalive & Andreas Kuhn & Jean-Philippe Wuellrich & Oliver Ruf & Simon B�chi, 2009. "Austrian social security database," IEW - Working Papers 410, Institute for Empirical Research in Economics - University of Zurich.
      • Josef Zweimüller & Rudolf Winter-Ebmer & Rafael Lalive & Andreas Kuhn & Jean-Philippe Wuellrich & Oliver Ruf & Simon Büchi, 2009. "Austrian Social Security Database," NRN working papers 2009-03, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
    40. Mikael Lindahl, 2005. "Estimating the Effect of Income on Health and Mortality Using Lottery Prizes as an Exogenous Source of Variation in Income," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
    41. Gregor Jarosch, 2015. "Searching for Job Security and the Consequences of Job Loss," Working Papers 2015-2, Princeton University. Economics Department..
    42. Martina Fink & Esther Segalla & Andrea Weber & Christine Zulehner, 2010. "Extracting Firm Information from Administrative Records: The ASSD Firm Panel," NRN working papers 2010-04, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
    43. Schmitz, Hendrik, 2011. "Why are the unemployed in worse health? The causal effect of unemployment on health," Labour Economics, Elsevier, vol. 18(1), pages 71-78, January.
    44. Schiele, Valentin & Schmitz, Hendrik, 2016. "Quantile treatment effects of job loss on health," Journal of Health Economics, Elsevier, vol. 49(C), pages 59-69.
    45. Christine Le Clainche & Pascale Lengagne, 2019. "The Effects of Mass Layoffs on Mental Health," Working Papers DT78, IRDES institut for research and information in health economics, revised May 2019.
    46. Lindeboom, Maarten & Portrait, France & van den Berg, Gerard J., 2010. "Long-run effects on longevity of a nutritional shock early in life: The Dutch Potato famine of 1846-1847," Journal of Health Economics, Elsevier, vol. 29(5), pages 617-629, September.
    47. Lang, Jessica & Ochsmann, Elke & Kraus, Thomas & Lang, Jonas W.B., 2012. "Psychosocial work stressors as antecedents of musculoskeletal problems: A systematic review and meta-analysis of stability-adjusted longitudinal studies," Social Science & Medicine, Elsevier, vol. 75(7), pages 1163-1174.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cristina Borra & Libertad González Luna & David Patiño, 2021. "Maternal age and infant health," Economics Working Papers 1791, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Abrahamsen, Signe A. & Ginja, Rita & Riise, Julie, 2021. "School Health Programs: Education, Health, and Welfare Dependency of Young Adults," IZA Discussion Papers 14546, Institute of Labor Economics (IZA).
    3. Felix Glaser & Gerald J. Pruckner, 2023. "A hard pill to swallow? Parental health shocks and children's mental health," Health Economics, John Wiley & Sons, Ltd., vol. 32(12), pages 2768-2800, December.
    4. Abeliansky, Ana Lucia & Beulmann, Matthias & Prettner, Klaus, 2024. "Are they coming for us? Industrial robots and the mental health of workers," Research Policy, Elsevier, vol. 53(3).
    5. Corazza, Ilaria & Pennucci, Francesca & De Rosis, Sabina, 2021. "Promoting healthy eating habits among youth according to their preferences: Indications from a discrete choice experiment in Tuscany," Health Policy, Elsevier, vol. 125(7), pages 947-955.
    6. Barili, E. & Bertoli, P. & Grembi, V. & Rattini, V., 2021. "COVID Angels Fighting Daily Demons? Mental Health of Healthcare Workers and Religion," Health, Econometrics and Data Group (HEDG) Working Papers 21/05, HEDG, c/o Department of Economics, University of York.
    7. Heather Kolakowski & Mardelle McCuskey Shepley & Ellie Valenzuela-Mendoza & Nicolas R. Ziebarth, 2021. "How the COVID-19 Pandemic Will Change Workplaces, Healthcare Markets and Healthy Living: An Overview and Assessment," Sustainability, MDPI, vol. 13(18), pages 1-19, September.
    8. Fischer, Martin & Karlsson, Martin & Prodromidis, Nikolaos, 2021. "Long‐term Effects of Hospital Deliveries," CINCH Working Paper Series (since 2020) 74712, Duisburg-Essen University Library, DuEPublico.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Everding, Jakob & Marcus, Jan, 2020. "The effect of unemployment on the smoking behavior of couples," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 29(2), pages 154-170.
    2. Ahammer, Alexander & Packham, Analisa, 2023. "Effects of unemployment insurance duration on mental and physical health," Journal of Public Economics, Elsevier, vol. 226(C).
    3. Miele, Kai R., 2024. "Mental Health and Labor Market Effects of Anticipating Job Loss," CINCH Working Paper Series (since 2020) 82169, Duisburg-Essen University Library, DuEPublico.
    4. Elira Kuka, 2020. "Quantifying the Benefits of Social Insurance: Unemployment Insurance and Health," The Review of Economics and Statistics, MIT Press, vol. 102(3), pages 490-505, July.
    5. Jérôme Adda & Yarine Fawaz, 2020. "The Health Toll of Import Competition," The Economic Journal, Royal Economic Society, vol. 130(630), pages 1501-1540.
    6. Gathmann, Christina & Huttunen, Kristiina & Jernström, Laura & Sääksvuori, Lauri & Stitzing, Robin, 2020. "In Sickness and in Health: Job Displacement and Health. Spillovers in Couples," Working Papers 133, VATT Institute for Economic Research.
    7. Schiele, Valentin & Schmitz, Hendrik, 2016. "Quantile treatment effects of job loss on health," Journal of Health Economics, Elsevier, vol. 49(C), pages 59-69.
    8. Been, J.; & Suari-Andreu, E.; & Knoef, M.;, 2022. "The short-run effects of unexpected job loss on health," Health, Econometrics and Data Group (HEDG) Working Papers 22/21, HEDG, c/o Department of Economics, University of York.
    9. Tsai, Yung-Yu & Huang, Po-Chun & Yang, Tzu-Ting, 2024. "Long-term effects of job displacement on earnings and mental health: Evidence from population-wide administrative data," Economics Letters, Elsevier, vol. 238(C).
    10. Bíró, Anikó & Elek, Péter, 2020. "Job loss, disability insurance and health expenditure," Labour Economics, Elsevier, vol. 65(C).
    11. Freise, Diana & Schmitz, Hendrik & Westphal, Matthias, 2022. "Late-career unemployment and cognitive abilities," Journal of Health Economics, Elsevier, vol. 86(C).
    12. Zhao, Yuejun, 2023. "Job displacement and the mental health of households: Burden sharing counteracts spillover," Labour Economics, Elsevier, vol. 81(C).
    13. Rocco, Lorenzo & Crema, Angela & Simonato, Lorenzo & Cestari, Laura, 2018. "The effect of job loss on pharmaceutical prescriptions," Social Science & Medicine, Elsevier, vol. 217(C), pages 73-83.
    14. Avdic, Daniel & de New, Sonja C. & Kamhöfer, Daniel A., 2021. "Economic downturns and mental health in Germany," European Economic Review, Elsevier, vol. 140(C).
    15. Schwandt, Hannes & Wachter, Till von, 2020. "Socioeconomic Decline and Death: Midlife Impacts of Graduating in a Recession," IZA Discussion Papers 12908, Institute of Labor Economics (IZA).
    16. Kamila Cygan‐Rehm & Daniel Kuehnle & Michael Oberfichtner, 2017. "Bounding the causal effect of unemployment on mental health: Nonparametric evidence from four countries," Health Economics, John Wiley & Sons, Ltd., vol. 26(12), pages 1844-1861, December.
    17. Tian, Xinping & Gong, Jinquan & Zhang, Yueqiu, 2018. "The effects of job displacement on health: Evidence from the economic restructuring in urban China," China Economic Review, Elsevier, vol. 52(C), pages 136-150.
    18. Hannes Schwandt & Till M. von Wachter, 2020. "Socio-Economic Decline and Death: The Life-Cycle Impacts of Recessions for Labor Market Entrants," NBER Working Papers 26638, National Bureau of Economic Research, Inc.
    19. Lídia Farré & Francesco Fasani & Hannes Mueller, 2018. "Feeling useless: the effect of unemployment on mental health in the Great Recession," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-34, December.
    20. Marcus, Jan, 2013. "The Effect of Unemployment on the Mental Health of Spouses – Evidence from plant closures in Germany," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 32(3), pages 546-558.

    More about this item

    Keywords

    Downsizing; mass layoffs; health; job insecurity;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jku:econwp:2020-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: René Böheim (email available below). General contact details of provider: https://edirc.repec.org/data/vlinzat.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.