Mental health and firm pay premiums

Abstract

Determining the effect of income on mental health remains an important and open question. We provide new causal evidence using a theory-driven mover design: exploiting job-to-job moves in a continuous-treatment event study, we estimate the effect of changes in firm pay premiums on the use of anti-anxiety and anti-depressant medications. The analysis links Dutch employer–employee records to administrative prescription data over 2006–2022. For the bulk of workers, higher firm pay reduces medication use: five years after a move a 10% increase in firm pay premium reduces anti-depressant use by around 4% of mean us-age. This effect holds across gender and age, and among within-sector movers. However, among the subset of workers experiencing large pay declines, medication use rises before the move and falls afterwards, consistent with mental-health shocks having negative career effects. Effect sizes are larger than those documented for unearned transfers, suggesting that the income–mental-health channel depends on the source of income.