The Causal Impact of Fear of Unemployment on Psychological Health

Abstract

We analyze the effect of job insecurity on psychological health. We extend the group of people being affected to employees who have insecure jobs to account for a broader measure of the mental health consequences of potential unemployment. Using panel data with staff reductions in the company as an exogenous source of job insecurity, we find that an increase in fear of unemployment substantially decreases the mental health status of employees. Quantile regression results yield particularly strong effects for individuals of already poor mental health.

Keywords: Fear of unemployment, mental health, job insecurity, labor market dynamics

JEL Classification: I10, I18, J28