Parental Health, Aging, and the Labor Supply of Young Workers

Abstract

To what extent are young workers affected by health shocks that happen to their parents? This paper studies the short and long-term spillover effects of parents' adverse health events on their adult children. We use the unique structure of the Panel Survey on Income Dynamics (PSID) to build family networks and construct a measure of sudden health changes. Exploiting news on parents' health status, we provide evidence of the existence of family insurance in the form of time and monetary transfers, and of the importance of family ties in shaping labor market outcomes. Following the deterioration of parents' health, time spent helping them goes up, while income and hours worked by children significantly decline.

Note:
Funding Information: None.

Conflict of Interests: None.

Keywords: Health, Family, Insurance, Intergenerational Altruism, Labor

JEL Classification: J01, J12, D1, E2