Firms and Health

Abstract

This paper quantifies heterogeneity across firms in their effects on employee health. Using matched employer-employee administrative data from the Netherlands, where healthcare access is universal and independent of employers, I estimate an Abowd, Kramarz, and Margolis (1999) model of log annual healthcare expenditures for full-time male workers between 2009 and 2016, applying a bias-correction to recover the variance in firm health effects. I find substantial heterogeneity across firms: moving a worker to a firm one standard deviation higher in the firm-effect distribution increases annual healthcare spending by about 17 percent. These firm effects also predict higher subsequent risks of disability and mortality. Over three-quarters of the variation arises within narrowly defined industries, suggesting that factors internal to firms, beyond industry technology, account for much of the observed heterogeneity. Firms associated with higher health costs tend to pay higher wage premiums, consistent with compensating differentials. The results reveal that firms are major producers of health inequality among workers.