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Discrete Heterogeneity in the Impact of Health Shocks on Labour Market Outcomes

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  • Stefanie Schurer

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

Empirical evidence from the psychology literature suggests that reactions towards health shocks depend strongly on the personality trait of locus of control, which is usually unobservable to the analyst. In this paper, the role of this discrete heterogeneity in shaping the effects of health shocks on labour supply are theoretically modelled by adopting the Grossman (1972) model. Using German longitudinal data, the predictions of the theoretical model are tested with a latent class binary choice model and an alternative identification strategy. A robust result across both specifications for various definitions of locus of control, health shocks and labour market outcomes is that internals have a smaller probability of leaving the labour market after experiencing a health shock than externals.

Suggested Citation

  • Stefanie Schurer, 2008. "Discrete Heterogeneity in the Impact of Health Shocks on Labour Market Outcomes," Melbourne Institute Working Paper Series wp2008n19, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2008n19
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    Cited by:

    1. Issam Khelfaoui & Yuantao Xie & Muhammad Hafeez & Danish Ahmed & Houssem Eddine Degha & Hicham Meskher, 2022. "Effects of Health Shocks, Insurance, and Education on Income: Fresh Analysis Using CHNS Panel Data," IJERPH, MDPI, vol. 19(14), pages 1-17, July.
    2. Morefield, Brant & Mühlenweg, Andrea M. & Westermaier, Franz, 2011. "Impacts of parental health on children's development of personality traits and problem behavior: Evidence from parental health shocks," ZEW Discussion Papers 11-049, ZEW - Leibniz Centre for European Economic Research.
    3. Schurer, Stefanie, 2014. "Bouncing Back from Health Shocks: Locus of Control, Labor Supply, and Mortality," IZA Discussion Papers 8203, Institute of Labor Economics (IZA).

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    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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