The Causal Effect of Profound Organizational Change When Job Insecurity Is Low-A Quasi-experiment Analyzing Municipal Mergers

Abstract

The present article finds that the causal effect of profound organizational change on employee health can be very low, if job insecurity is mitigated. We demonstrate this by investigating a rare case of a large-scale radical public sector reform with low job insecurity, in which a large number of municipalities are merged into larger local governments, whereas other municipalities are not merged. This adds to previous research, which documents that organizational changes following public sector reform impact employee health negatively. We argue that a conceptual distinction between organizational change and job insecurity may explain the divergence from previous results. An important strength of our study is that the reform investigated can be considered a quasi-experiment, as it was exogenous and implemented simultaneously by the affected local governments. We also have access to an objective measure of the extent of organizational change, which is combined with objective measures of health outcomes from administrative data. The unique availability of high-quality longitudinal data combined with an exogenous reform provides a strong research design, which allows us to draw causal inferences. A number of robustness tests are performed, including propensity score matching and in-depth analysis of particular subgroups of public sector employees. The results indicate that profound organizational change per se does not necessarily lead to decreased health, if job insecurity is low. However, a very modest effect on long-term absenteeism is seen for employees coming from very small municipalities that have been merged into the newly formed organizations.