The effects of health shocks on labor market outcomes: evidence from UK panel data

Otto Lenhart ()
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Otto Lenhart: University of Strathclyde

The European Journal of Health Economics, 2019, vol. 20, issue 1, No 7, 83-98

Abstract: Abstract This study examines the link between health shocks and labor market outcomes in the United Kingdom. For sample periods of up to 9 years, I use longitudinal data from the British Household Panel Survey to test how sudden health shocks affect a number of labor market outcomes, such as labor and household income, employment status, and hours worked. Additionally, the study examines potential mechanisms underlying the link between health declines and labor market outcomes. By estimating propensity score matching difference-in-differences models, the study shows that sudden health declines lead to significant and persistent reductions in earnings. The effects are strongest for individuals experiencing severe health shocks, males, individuals with higher education and those working in managerial jobs. When examining potential channels, I provide evidence that increased health care expenditures and health care usage as well as reduced work productivity can explain the observed effects on labor market outcomes.

Keywords: Health shocks; Labor market; Mechanisms; United Kingdom (search for similar items in EconPapers)
JEL-codes: C23 I10 I12 J60 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (22)

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DOI: 10.1007/s10198-018-0985-z

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