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The Health Externalities of Downsizing

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  • Ahammer, Alexander

    (University of Linz)

  • Grübl, Dominik

    (University of Linz)

  • Winter-Ebmer, Rudolf

    (University of Linz)

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.

Suggested Citation

  • Ahammer, Alexander & Grübl, Dominik & Winter-Ebmer, Rudolf, 2020. "The Health Externalities of Downsizing," IZA Discussion Papers 13984, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp13984
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    2. Barili, Emilia & Bertoli, Paola & Grembi, Veronica & Rattini, Veronica, 2021. "COVID Angels Fighting Daily Demons? Mental Health of Healthcare Workers and Religion," CINCH Working Paper Series (since 2020) 74583, Duisburg-Essen University Library, DuEPublico.
    3. 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).
    4. 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.
    5. 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.
    6. 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.
    7. Fischer, Martin & Karlsson, Martin & Prodromidis, Nikolaos, 2021. "The Long-Term Effects of Hospital Deliveries," IZA Discussion Papers 14562, Institute of Labor Economics (IZA).

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    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

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