DaCHE discussion papers,
University of Southern Denmark, Dache - Danish Centre for Health Economics

Abstract: The onset of a major illness is one of the most sizeable and unpredictable shocks an individual mayexperience and can have devastating effects not only on the individual but the entire household,including children. If a parental health shock reduces investments in children, it may have long-lastingimplications on the children’s future socioeconomic status with consequences on their adult health. Using a detailed longitudinal dataset of Danish children born in the period 1987-2000, this paper studies how a severe parental health shock affects children’s school achievements. We use coarsened exact matching to control for potential endogeneity between parental health and children’s school outcomes and employ cancer specific survival rates to measure the size of the health shock. We findrobust negative effects of a parental health shock on children’s basic school grades as well as their likelihood of starting and finishing secondary education, especially for poor prognosis cancers. We observe different outcomes across children’s gender and age, but no effects of family-related resilience factors such as parental education level. The effects seem not to be driven by pecuniary costs but by non-pecuniary costs such as time and emotional investments. Moreover, we find that the negative effects on school performance increase in the size of the health shock for both survivors and deaths suggesting that the trajectory of the illness, and not only final outcome, is important.

Keywords: Health shocks; Parental investments; Children’s education; Denmark

JEL-codes: I14; I21; O15

60 pages, July 13, 2020

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