The Health Externalities of Downsizing

50 Pages Posted: 4 Jan 2021

See all articles by Alexander Ahammer

Alexander Ahammer

Johannes Kepler University Linz - Department of Economics

Dominik Grübl

Johannes Kepler University Linz

Rudolf Winter-Ebmer

Johannes Kepler University Linz - Department of Economics; Institute for Advanced Studies (IHS) - Department of Economics & Finance; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

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.

JEL Classification: J63, I12, J23

Suggested Citation

Ahammer, Alexander and Grübl, Dominik and Winter-Ebmer, Rudolf, The Health Externalities of Downsizing. IZA Discussion Paper No. 13984, Available at SSRN: https://ssrn.com/abstract=3758685

Alexander Ahammer (Contact Author)

Johannes Kepler University Linz - Department of Economics ( email )

Altenbergerstrasse 69
A-4040 Linz, 4040
Austria

HOME PAGE: http://www.econ.jku.at/ahammer/

Dominik Grübl

Johannes Kepler University Linz ( email )

Altenbergerstr. 69
A-4040 Linz, 4040
Austria

Rudolf Winter-Ebmer

Johannes Kepler University Linz - Department of Economics ( email )

Altenbergerstrasse 69
A-4040 Linz, 4040
Austria
+43 732 2468 8236 (Phone)
+43 732 2468 8238 (Fax)

HOME PAGE: http://www.econ.jku.at/winter

Institute for Advanced Studies (IHS) - Department of Economics & Finance ( email )

Stumpergasse 56
A-1060 Vienna, A-1060
Austria

HOME PAGE: http://www.ihs.ac.at

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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