Long-Term and Spillover Effects of Health Shocks on Employment and Income

Abstract

We use matching combined with difference-in-differences to identify the causal effects of sudden illness, represented by acute hospitalizations, on employment and income up to six years after the health shock using linked Dutch hospital and tax register data. An acute hospital admission lowers the employment probability by seven percentage points and results in a five percent loss of personal income two years after the shock. There is no subsequent recovery in either employment or income. There are large spillover effects: household income falls by 50 percent more than the income of the disabled person.

The impact of adverse health events on consumption: Understanding the mediating effect of income transfers, wealth, and health insurance

“…The premise of these studies is that a new adverse health event raises the disutility of work and therefore reduces labor supply and diminishes labor productivity and therefore reduces the wage rate. A new adverse health event negatively impacts earnings, but the decline in earnings with the onset of a mental illness is larger than the decline following a physical illness (Bartel & Taubman, 1986;Benham & Benham, 1981;Chatterji, Alegria, & Takeuchi, 2011;Chirikos & Nestel, 1985;McClellan, 1998;Stephens, 2001;García-Gómez & Lopez-Nicolás, 2006;García-Gómez, van Kippersluis, O'Donnell, & van Doorslaer, 2013). Although there is no consensus on the magnitude of the impact of health on labor supply (or its impact relative to other effects), studies in general conclude that physical and mental illnesses lead to early retirement (Bound, Schoenbaum, Stinebrickner, & Waidmann, 1999;Disney, Emmerson, & Wakefield, 2006;McGarry, 2004;Coile, 2004;Ojeda, Frank, McGuire, & Gilmer, 2010).…”

The Long-Term Effects of Cancer on Employment and Earnings

“…This specification is very similar toGarcia-Gomez et al (2013), who use propensity score matching weights for a DID regression to study the effects of acute hospital admissions on employment and income. For comparison, the middle panel in AppendixTable A3shows the results from the weighted linear regression previously reported inTable IV: The bottom panel shows the results from the linear regression…”

Health Inequalities through the Lens of Health-Capital Theory: Issues, Solutions, and Future Directions

“…Unhealthy individuals drop out of the labour force sooner, and lose income as a result. This explanation was proposed by Smith (1999; 2007), and Case and Deaton (2005), and has been corroborated by quasi-experimental evidence of the effect of sudden health shocks on earnings and income (Møller Dano, 2005; Garcia-Gomez et al 2013; and Halla and Zweimuller, 2013).

Among dimensions of socioeconomic status, education seems to be the most important determinant of health

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“…It has been established that causality runs in both directions: evidence is strong that health affects socioeconomic characteristics such as employment and income (e.g. Smith, 1999; Garcia-Gomez, van Kippersluis, O’Donnell, and van Doorslaer, 2013), and the evidence base is growing that socioeconomic characteristics, in particular education, affect health (e.g. Lleras-Muney, 2005; Conti, Heckman and Urzua, 2010; Van Kippersluis, O'Donnell, and van Doorslaer, 2011).…”