Out for Good: Labor Market Effects of Transitory and Persistent Health Shocks

49 Pages Posted: 22 Mar 2022

See all articles by Mattis Beckmannshagen

Mattis Beckmannshagen

Free University of Berlin (FUB) - Department of Business and Economics

Johannes Koenig

German Institute for Economic Research (DIW Berlin)

Date Written: February 15, 2022

Abstract

Health shocks limit individuals’ participation in the labor market and pose a major risk to household welfare. In this paper, we derive two novel health shock indicators using machine learning based on sick days and hospitalizations: one for transitory and one for persistent shocks. In an event study framework, we show their respective effects on employment, yearly working hours, and labor earnings, but also partner earnings and household net income. Persistent shocks induce large negative employment effects that end up impacting household net incomes. In contrast, transitory shocks induce only minor employment effects that leave household net incomes unaffected.

Keywords: labor supply, health shocks, machine learning, event study

JEL Classification: I10, J22, H51

Suggested Citation

Beckmannshagen, Mattis and Koenig, Johannes, Out for Good: Labor Market Effects of Transitory and Persistent Health Shocks (February 15, 2022). Available at SSRN: https://ssrn.com/abstract=4036482 or http://dx.doi.org/10.2139/ssrn.4036482

Mattis Beckmannshagen (Contact Author)

Free University of Berlin (FUB) - Department of Business and Economics ( email )

Boltzmannstrasse 20
D-14195 Berlin, 14195
Germany

Johannes Koenig

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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