The causal effect of job insecurity on health – Study based on a sample of the elderly from 20 different European countries
Many studies have found evidence for associations between increased job insecurity and deterioration of different health aspects. Only few studies attempted to uncover the real causal effect of job insecurity on health. By conducting an instrumental variable approach, using Employment Protection Legislation indicators as instruments, this study tries to estimate the actual causal effect of this relation. Data from the Survey of Health, Aging and Retirement in Europe is used to examine this relation for individuals ranging between the age of 40 and 70 from 20 different European countries. Contradicting existing literature, mainly by Caroli and Godard (2016), this study finds a causal effect of job insecurity for eight out of nine examined health indicators. Only showing no significant causal effect for self-perceived health. Results show that coefficients from causal effects are substantially larger than coefficients based on associations, indicating that the effect is more profound than previous research implies. Additionally, this study examines heterogeneous groups, finding differences for gender and marital status. However, no substantial differences between age groups are found. Overall, the results from this study have serious implications for labour market related policy advice. Policy makers need to take into account that job insecurity deteriorates health when examining welfare effects of labour market related policies.