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We estimate the effects of job insecurity on the mental health of older workers in the United States. To address endogeneity problems, we exploit panel data and plausibly…
We estimate the effects of job insecurity on the mental health of older workers in the United States. To address endogeneity problems, we exploit panel data and plausibly exogenous changes in job loss expectations following eliminations of similar positions and other types of jobs at the worker’s employer, as well as changes in employment at the industry–state level. We provide evidence that job insecurity, as measured by the self-reported probability of job loss, increases stress at work and the risk of clinical depression. We also find that the use of instrumental variables increases the size of the estimated effects. We interpret this as evidence that job insecurity which is outside the control of workers may have much larger effects on mental health. Our findings suggest that employers should worry about the mental health of workers in periods of downsizing, periods which are crucial for the recovery of firms in financial difficulties and which may depend particularly on the productivity of its workers.