Employee Health and Firm Performance
67 Pages Posted: 8 Mar 2022 Last revised: 25 Apr 2023
There are 2 versions of this paper
Employee Health and Firm Performance
Employee Health and Firm Performance
Date Written: April 25, 2023
Abstract
Using administrative data on the universe of private firms in Denmark, we find that even temporary and small health shocks to employee health like seasonal influenza can significantly reduce firm profitability. The results hold both across firms and within firms, at the establishment level. The effects are driven by labor-intensive firms and decrease in firm size and financial flexibility, suggesting that firms that are better able to shift resources can better mitigate the effects of health shocks. Our results indicate that employees are shielded from these negative effects, while owners (especially of small firms) see reduced dividends. Firms with a larger share of low-salary and low-skill employees are more affected, emphasizing that the health of all employees matters for firm performance and not just top employees like the CEO. Finally, back-of-the-envelope calculations suggest that all but the largest firms may benefit from subsidizing vaccination programs for their employees.
Keywords: seasonal influenza, health shock, firm performance
JEL Classification: L25, I12, G30, J31
Suggested Citation: Suggested Citation