Acute health shocks and labour market outcomes: Evidence from the post crash era

https://doi.org/10.1016/j.ehb.2019.100811Get rights and content
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Highlights

  • We investigate the labour supply response to an acute health shock.

  • Evidence is drawn in the post crash era.

  • We find a substantial decrease in labour market participation, hours and earnings.

  • Younger workers display a stronger labour market attachment.

  • Impacts are stronger for women, older workers, and more severe impairments.

Abstract

We investigate the labour supply response to an acute health shock for individuals of all working ages, in the post crash era, combining coarsened exact matching and entropy balancing to preprocess data prior to undertaking parametric regression. Identification exploits uncertainty in the timing of an acute health shock, defined by the incidence of cancer, stroke, or heart attack, based on data from Understanding Society. The main finding implies a substantial increase in the baseline probability of labour market exit along with reduced hours and earnings. Younger workers display a stronger labour market attachment than older counterparts, conditional on a health shock. Impacts are stronger for women, older workers, and those who experience more severe limitations and impairments. This is shown to be robust to a broad range of approaches to estimation. Sensitivity tests based on pre-treatment outcomes and using future health shocks as a placebo treatment support our identification strategy.

JEL classification

C14
I10
J22

Keywords

Acute health shocks
Labour supply
Matching methods
Panel data

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