The Impact of Health Events on Individual Labor Market Histories: The Message from Difference-in-Differences with Exact Matching

Abstract

erudite and tepp and Christine LE CLAINCHE y centre d' études de l' emploi lameta UMR 5474 ENS Cachan

Health shocks adversely impact participation in the labour force in a working age population: a longitudinal analysis

“…These results support previous research that health selection is present in the causal relationship between health and labour force participation. 4,6,8,9,23,34,35 There was no statistically significant evidence of a different relative association of health shock with change in labour force status by sex and age.…”

“…However, most studies have shown that the health selection pathway is stronger than the social causation pathway when looking at the causal relationship between health and labour force participation. 6,23,34 A number of studies have found a (subjective) health shock was more likely to precipitate an exit from the labour force into early retirement or other reasons (e.g. into parenthood, receiving disability benefits and even late life education) rather to unemployment.…”

“…10,27,28 More objective measures of health, such as a newly diagnosed disease or injury are less likely to be affected by this justification and recall bias. 23 In a recent French study, a (non-work related) accident increased the probability of inactivity in the workforce, which was higher in women than men. 23 The outcome of a 'health shock' (such as newly diagnosed disease) is also preferable over measures of chronic illness or disability, as long-standing illness is likely to have already affected labour force participation.…”

“…23 In a recent French study, a (non-work related) accident increased the probability of inactivity in the workforce, which was higher in women than men. 23 The outcome of a 'health shock' (such as newly diagnosed disease) is also preferable over measures of chronic illness or disability, as long-standing illness is likely to have already affected labour force participation. Observing the effect of a relatively unanticipated change in health on subsequent participation in the labour market is a better way to approximate the true causal association between health and labour force participation than self-reported or chronic illnesses measures, which may be subject to bias.…”

“…16 Chronic illness and disease have been shown to reduce labour force participation, 1,[17][18][19] and the onset of new chronic conditions had a significant and substantial negative effect on the probability of future employment. [20][21][22][23] In European studies, declines in self-rated health and health satisfaction were associated with reduced employment and income.…”