SOEPpapers on Multidisciplinary Panel Data Research 282
This paper analyzes the impact of job insecurity perceptions on individual well-being. In contrast to previous studies, we explicitly take into account perceptions about both the likelihood and the potential costs of job loss and demonstrate that most contributions to the literature suffer from simultaneity bias. When accounting for simultaneity, we find the true unbiased effect of perceived job insecurity to be more than twice the size of naive estimates. Accordingly, perceived job insecurity ranks as one of the most important factors in employees' well-being and can be even more harmful than actual job loss with subsequent unemployment.