A model of job-stress and burnout

Abstract

Job-stress develops when the demands of work exceed the resources that a worker has for managing these demands. Chronic job-stress reduces work capacity, causing burnout, resulting in a loss of utility for workers and a loss of revenue for firms. We present the first economic theory of job-stress and burnout and show how they arise from organisational design and product market conditions. Burnout covers a wide range of negative health outcomes induced by stress such as psychological burnout, depression, heart disease and increased mortality risk. Firms have heterogeneous efficiency and hence differ in the cost of providing job resources. In equilibrium some firms are a great place to work, never causing burnout, some firms are moderate quality workplaces and do cause burnout, while the worst workplaces result in employees quitting before they are burnt out. As competition increases, burnout increases in both extensive and intensive margins: the possibility of burnout arises in more firms, and workers become more likely to experience burnout in each firm. Autonomy enables workers to manage higher levels of stress, but it also impacts job demands by inducing changes in firms’ investment in resources. Ex post mismatch causes inefficiency by introducing an information asymmetry (only a worker knows if they are mismatched) resulting in under-investment in resources and excessive quitting.