We use administrative data on the quarterly employment and earnings of Pennsylvanian workers in the 1970s and 1980s matched to Social Security Administration death records covering 1980–2006 to estimate the effects of job displacement on mortality. We find that for high-seniority male workers, mortality rates in the year after displacement are 50%–100% higher than would otherwise have been expected. The effect on mortality hazards declines sharply over time, but even twenty years after displacement, we estimate a 10%–15% increase in annual death hazards. If such increases were sustained indefinitely, they would imply a loss in life expectancy of 1.0–1.5 years for a worker displaced at age forty. We show that these results are not due to selective displacement of less healthy workers or to unstable industries or firms offering less healthy work environments. We also show that workers with larger losses in earnings tend to suffer greater increases in mortality. This correlation remains when we examine predicted earnings declines based on losses in industry, firm, or firm-size wage premiums.

In this paper we exploit a unique database that merges longitudinal earnings data on Pennsylvanian workers with national death records to study the detailed nature of the correlation between earnings and mortality. We find that the estimates typically reported in the literature, which are based on single years of earnings data, are likely to understate substantially the strength of the association between income and mortality. In particular, relative to a single year of earnings, the average of earnings over a six-year period predicts a 70 percent greater impact of income on mortality. In addition, controlling for the mean level of earnings over a period, we find that greater earnings volatility is associated with higher mortality. We also examine the lag structure of the relationship between earnings and mortality. We find that conditional on a small number of years of recent earning levels, there is little or no correlation between earnings levels in earlier years and current mortality. This runs counter to the interpretation of the earnings-mortality correlation that views workers as "buying health" by allocating a steady fraction of their earnings to the accumulation of a health stock. It is also inconsistent with interpretations of the earnings- mortality link emphasizing the correlation of both variables with an unobserved, time-invariant trait, such as the rate at which workers discount the future. We find that explaining the patterns of correlation appears to require a relatively complex theory that we leave to future research.

Forward-looking behavior on the part of the monetary authority makes it difficult to estimate the effect of monetary policy interventions on output. We present instrumental variables estimates of the impact of interest rates on quarterly real output for several European countries, using German interest rates as the instrument. These estimates confirm a strong forward-looking bias in least squares estimates that persists even conditional on standard controls for the history of the system. Due to the potential for correlation of output shocks across countries, we interpret our estimates as lower bounds for the effect of monetary policy on real output.