Job Loss Does Not Cause Ill Health

Abstract

I use longitudinal data from the Health and Retirement Study to estimate the effect of job loss on health for near elderly employees. Job loss is a major cause of economic insecurity for working age individuals, and can cause reduction in income, and loss of health insurance. To control for possible reverse causality, this study focuses on people who were laid off for an exogenous reason, the closure of their previous employers’ business. I find that the unemployed are in worse health than employees, and that health reasons are a common cause of job termination. In contrast, I find no causal effect of exogenous job loss on various measures of health. This suggests that the inferior health of the unemployed compared to the employed could be explained by reverse causality. I also use instrumental variable regression to estimate the effect of loss of health insurance, loss of income, and re-employment on health, and again find no statistically significant effects.