Income Effects of a Parental Health Shock

Julie Treguier , DIW Berlin
Pieter Bakx, Erasmus University Rotterdam
Johannes Geyer, DIW Berlin
Peter Haan, DIW Berlin

We analyze the dynamic effects of a parental health shock and the related informal care provision on employment, earnings and public transfers of adult children and their partners. We use unique data from the Netherlands which combines intergenerational administrative data and survey data including information about informal care provision. For the identification of a causal effect we use the sudden and unexpected parental health shock in an event-study design. We show that a sudden parental health shock reduces employment by about 0.14 percentage point (0.2%) and earnings by about e163 per year (0.4%) over the five years after the shock. We further show that disability benefits partially mitigate the earnings effect while there are no compensating effects from unemployment benefits and other transfers. The adverse employment and earnings effects are larger on the household level since earnings of the partner are also negatively affected by the parental health shock. Finally, the decrease in earnings for informal caregivers is much larger (€-1,799 or -5.2%) than for the overall study population suggesting that caregiving is the main mechanism.

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 Presented in Session 124. Intergenerational Mobility and Influences