The role of firms in the wage penalty for chronic health conditions

Márta Bisztray (), Balázs Muraközy () and Rita Pető ()
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Márta Bisztray: HUN-REN Centre for Economic and Regional Studies
Balázs Muraközy: HUN-REN Centre for Economic and Regional Studies; University of Liverpool Management School
Rita Pető: HUN-REN Centre for Economic and Regional Studies

No 2508, KRTK-KTI WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: More than one-third of people in the EU report having a chronic health condition (CHC), and their share in the workforce is expected to rise. Using unique linked employer-employee administrative data from Hungary—combining detailed healthcare utilization with wage records—we identify workers with CHCs and analyze their labor market outcomes with a focus on the role of firms. Men and women with CHCs are 7 and 14 percentage points less likely to be employed, respectively. Among the employed, we find wage penalties of 5.8% for men and 13.9% for women. Differences in firm-specific pay premiums account for 12% of the penalty for men and 23% for women. Event-study models with worker fixed effects show persistent wage losses following CHC onset—4% for men and 1.5% for women—of which 0.2–0.5 percentage points are due to moving to lower-paying firms, with the rest likely reflecting missed promotions and raises. We then look at the role of firm ownership, foreign ownership being a strong proxy for technology, and find that 20% of the penalty is accounted for by this firm characteristic, 60-70% of which results from worker sorting and the remaining from CHC workers benefiting less from the higher wage premium of foreign-owned firms. These numbers imply that the fall in wages between the ages 40 and 60 would be 10-20% lower had there been no CHC penalty, about 20% of which is attributable to the presence of foreign-owned firms.

Keywords: Chronic health conditions; firm heterogeneity; wage inequality; foreign-owned firms (search for similar items in EconPapers)
JEL-codes: F23 J14 J31 M52 (search for similar items in EconPapers)
Date: 2025-06
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