Career Effects of Mental Health
One in twelve Americans is affected by a mental health disorder. This paper examines the effects of such disorders and treatment, using individual-level registry data on mental health diagnoses. We find that mental health conditions carry immense earnings penalties: Compared with the population, people with depression earn 32 percent less, people with bipolar disorder earn 36 percent less, and people with schizophrenia earn 74 percent less. Even compared with their siblings, they earn 35, 28, and 74 percent less, respectively. People with mental health disorders also face substantially higher risks of zero earnings and disability. To investigate the causal effects of treatments and changes in mental health we examine the approval of lithium as a treatment for bipolar disorder (BD) in 1976. Baseline estimates compare career outcomes for people with and without access to treatment in their early 20s, the typical age of onset for BD. We find that access to treatment eliminates one third of the earnings penalty from BD, reduces the risk of zero earnings by more than one third, and reduces the risk of disability by nearly two thirds. Notably, not only the costs of mental health disorders, but also the benefits from treatments are strongest in the bottom quantiles of earnings. These findings indicate that access to treatment has important implications for economic inequality.
Entrepreneurship and Inequality
The social scientific evidence linking entrepreneurship, individuals’ lives, and economic inequality and prosperity remains limited at best. We know little about the jobs created by new firms and how the risk of firm failure affects the careers and life courses of individuals. Who are the beneficiaries of entrepreneurial activity? How are the careers and life courses of the individuals affected by entrepreneurship? This multi-paper project’s aim is to provide a rigorous set of analyses leading to a much deeper understanding of entrepreneurship and inequality focusing on these and other related questions.
- M. Diane Burton, Michael S. Dahl and Olav Sorenson (2018), Do Startups Pay Less?, Industrial and Labor Relations Review. DOI
- Olav Sorenson, Michael S. Dahl, Rodrigo Canales and M. Diane Burton, The Startup Employee Earnings Gap: The Long-term Income Consequences of Joining Small and Young Firms. Submitted.
Pay-for-Performance and Employee Mental Health: Large Sample Evidence Using Employee Prescription Drug Usage
with Lamar Pierce
This paper provides the first evidence linking pay-for-performance (P4P) adoption by employers to long-term and serious mental health problems in employees. Matching survey-based data on P4P adoption by 1,309 Danish firms with objective wage, demographic, and medical prescription data of their 318,717 full-time employees, we find a four to six percent increase in the usage of anti-depressant and anti-anxiety medication after firms adopt P4P. This change appears almost exclusively in those with lower wage changes and those older than fifty. We also find evidence that workers select in and out of P4P firms based on mental health considerations, which implies that mental health effects influence job retention and attrition. Finally, we show different responses from female and male employees to the mental health threat of performance-based pay. Women with latent or potential mental health concerns appear to leave firms after P4P adoption, while men show now such response. Although we cannot claim a causal relationship, collectively our results support prior theoretical arguments that performance-based pay may indeed increase stress. More importantly, our study shows that the mental health costs of performance-based pay can be severe, necessitating medical treatment and possibly job change for some individuals.
Resubmitted – PDF Winner of Annual Meeting of the Academy of Management Distinguished Paper Award 2018 (Strategy Division)
We study motivations for and outcomes of couples starting up a joint firm, using a sample of 1,069 Danish couples that established a joint enterprise between 2001 and 2010, while comparing them to a set of comparable firms and couples. The main motivation for joint entrepreneurship is to create a labor market position for (female) spouses with limited alternative opportunities. This decision has positive effects: the financial benefits for each of the spouses, and especially the female, are larger in co-entrepreneurial firms, both during the life of the business and post-dissolution. This also reduces income inequality in the household.