Department of Economics and Business Economics

The Impact of Childhood Health Shocks on Parental Labor Supply

Research output: Working paperResearch

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  • wp20_02

    Final published version, 1.24 MB, PDF document

  • Tine L. Mundbjerg Eriksen, VIVE - The Danish Center for Social Science Research
  • ,
  • Amanda Gaulke, Kansas State University
  • ,
  • Niels Skipper
  • Jannet Svensson, University of Copenhagen, Denmark
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.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages39
Publication statusPublished - Mar 2020
SeriesEconomics Working Papers
Number2020-02

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