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The Impact of Childhood Health Shocks on Parental Labor Supply

Tine Louise Eriksen, Amanda Gaulke, Niels Skipper () and Jannet Svensson
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Niels Skipper: Department of Economics and Business Economics, Aarhus University, Postal: Department of Economics and Business Economics, Aarhus University, Fuglesangs Alle 4, DK-8210 Aarhus V
Jannet Svensson: Copenhagen University Hospital, Copenhagen, Denmark

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: Causal estimates of the effects of child health shocks on parental labor market outcomes are important for making efficient child disability insurance policy. We leverage the onset of type 1 diabetes (T1D) in childhood to investigate the link between child’s health and parental labor supply. We argue that T1D hits children as-if randomly because the exact cause is unknown, and it has low inheritability. T1D is characterized by a sudden, unpredictable onset, and receiving treatment is crucial to even short-term survival. Using Danish administrative registry data with quasi-experimental methods we show that mothers adjust their labor supply on the intensive margin and experience a 4-5% decrease in wage income that extends at least ten years after diagnosis. This reduction in wage income is similar in magnitude and duration to the motherhood penalty in Denmark. Maternal wage income and labor supply effects are smaller than previous estimates using disabilities that qualify for welfare, emphasizing the importance of not confounding welfare with child health. Fathers do not experience any long-term reduction in wage income.

Keywords: Parental labor supply; chronic disease; health shocks (search for similar items in EconPapers)
JEL-codes: J22 I12 I14 (search for similar items in EconPapers)
Pages: 37
Date: 2020-03-10
New Economics Papers: this item is included in nep-hea
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