Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2011:11: Socioeconomic heterogeneity in the effect of health shocks on earnings: evidence from population-wide data on Swedish workers

Petter Lundborg (), Martin Nilsson () and Johan Vikström ()
Additional contact information
Petter Lundborg: Lunds University
Martin Nilsson: IFAU - Institute for Labour Market Policy Evaluation, Postal: P O Box 513, SE-751 20 Uppsala, Sweden
Johan Vikström: Institute for Labout Market Policy Evaluation, Postal: P O Box 513, SE-751 20 Uppsala, Sweden

Abstract: In this paper, we test for the existence of socioeconomic heterogeneity in the effect of health shocks on labor market outcomes using register data on the total population of Swedish workers. We estimate fixed effect models and use unexpected hospitalizations as a measure of health shocks. Our results suggest large heterogeneity in the effects, where low educated individuals suffer relatively more from a given health shock. This result holds across a wide range of different health shocks and our results suggest that the heterogeneity increases by age. We test several potential explanations to these results. Extensive sensitivity analyses, including a difference-in-differences matching model, show that our estimates are robust to a number of potential threats. We conclude that socioeconomic heterogeneity in the effect of health shocks offers one explanation to why the socioeconomic gradient in health widens during middle ages.

Keywords: Health; health shocks; socioeconomic status; life-cycle

JEL-codes: I10; I12

51 pages, August 31, 2011

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