Health and household labor supply: instantaneous and adaptive behavior of an aging workforce

This paper examines how an individual’s labor supply responds immediately to her spouse’s health shock in an aging household and how she adjusts her labor supply over time after her spouse’s health shock. Different from previous work, this paper considers the subsequent health evolution following the spouse’s health shock by proposing an adaptation model where the long-term labor supply adjustment of an individual is allowed to depend on her spouse’s health evolution after the initial shock. Analysis of the 1996-2012 data from the Health and Retirement Study (HRS) suggests that in the short run, both husbands and wives change their labor supply very little when their spouses become ill, but in the long run, a husband’s labor supply adjustment does vary with his wife’s current health status after her initial health shock. In contrast, the wife’s annual work hours are not affected by her husband’s health shock in the long run, regardless of husband’s subsequent health status. Households with an ill wife are probably at greater risk than those with an unhealthy husband in the long run, which may be attributed to the role that women have traditionally played in the household.