Acute Health Shocks and Labour Market Outcomes

Abstract

We investigate the labour supply response to acute health shocks experienced in the post-crash labour market by individuals of working age, using data from Understanding Society. Identification that exploits uncertainty in the timing of an acute health shock, defined by the incidence of cancer, stroke, or heart attack. Results, obtained through a combination of coarsened exact and propensity score matching, show acute health shocks significantly reduce participation, with younger workers displaying stronger labour market attachment. The impact on older, more educated, women suggests an important role for preferences, financial constraints, and intra-household division of labour determining labour supply decisions.