Background The Fornero unemployment benefit reforms in Italy increased replacement rates from 60% to 75% for first six months of unemployment, beginning January 1st, 2013. We exploit the roll-out of this reform as a natural experiment to evaluate whether those experiencing job loss in 2011 or 2012 (N=75) endured greater declines in health comapred to those experiencing job loss in 2013 or 2014 (N=127).

Methods We utilize data from the Italian version of EU-Survey on Income and Living Conditions (SILC), longitudinal sample (2010—2014), yearly data supplemented with retrospective monthly calendar data. To construct our treatment and control groups we apply a series of restrictions in order to isolate those who were highly likely to have been affected by the pre and post-Fornero unemployment benefit regimes. Our dependent variable is change in self-rated health. To test our hypotheses, we implement difference-in-difference modelling, adjusting for gender, interview month, household income, region of residence, whether the respondent has any chronic illness, occupation, and marital status.

Results Our difference-in-difference estimate for changes in health following job loss pre and post Fornero reforms is statistically significant (ATT=0.349, p<0.01). This corresponds to almost no change in self-rated health in the post-Fornero treatment group (Δ Health=0.032), and a decline in health for the pre-Fornero control group (Δ Health=-0.317). These models are robust to several alternative specifications.

The decline in health for the pre-Fornero group represents 0.43 of a standard deviation for health change. For effect size comparison, the negative association between reporting any chronic illness and health change corresponds to 0.33 of a standard deviation (adjusting for age and sex).

Conclusion While the links between unemployment and health are well documented, very little is known about specific policy contexts that may mitigate the health-effects of job loss. This study leverages a novel research design to shed new light on the ways that institutional factors may modify the social determinats of health at the individual level.