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The impacts of health shocks on household labor supply and domestic production

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  • Di Meo, Giovanni
  • Eryilmaz, Onur

Abstract

This paper investigates the impact of severe health shocks on labor supply decisions and domestic production within German households. We draw from the German Socio-Economic Panel (SOEP), focusing on individuals aged 25 to 55 at the time of their first observed health shock. After the health shock, we find that affected individuals suffer a persistent loss in annual gross labor income of around 4,000 euros. This effect results mostly from adjustments at the extensive margin, with labor market participation declining by about 16%. We observe a reduction in full-time employment, but no significant effect on part-time employment. At the household level, a combination of public transfers and added worker effect effectively compensates for the income loss. Finally, individuals experiencing a health shock, particularly women, spend more time on domestic production.

Suggested Citation

  • Di Meo, Giovanni & Eryilmaz, Onur, 2025. "The impacts of health shocks on household labor supply and domestic production," Journal of Health Economics, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:jhecon:v:101:y:2025:i:c:s0167629625000268
    DOI: 10.1016/j.jhealeco.2025.102992
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    Keywords

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    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health

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