Working Paper: CEPR ID: DP15588
Authors: Alexander Ahammer; Dominik Grbl; Rudolf Winterebmer
Abstract: We 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 high-quality 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.
Keywords: downsizing; mass layoffs; health; job insecurity
JEL Codes: J63; I12; J23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| mass layoffs (J63) | persistent health issues among remaining workforce (J28) |
| mass layoffs (J63) | declines in health (I12) |
| job insecurity (J63) | persistent health issues among remaining workforce (J28) |
| pre-existing conditions (I12) | increased health issues among remaining workers (J28) |
| female workers (J82) | increased probability of cardiac events (G14) |
| increased health issues among remaining workers (J28) | significant costs on firms (G32) |
| mass layoffs (J63) | health externalities (D62) |
| downsizing (L25) | negative health externalities (D62) |
| wage cuts (J38) | negative health externalities (D62) |