Birth weight and vulnerability to a macroeconomic crisis

Abstract

This paper shows that early-life health is an important determinant of labor market vulnerability during macroeconomic downturns. Using data on twins during Sweden's crisis of the early 1990s, we show that individuals with higher birth weight are differentially less likely to receive unemployment insurance benefits after the crisis as compared to before it, and that this effect is concentrated among workers in the private sector. While differences in early-life health thus lead to increased inequality in employment outcomes, we also find that there is no differential effect of birth weight on total income after the crisis. This suggests that in the context of Sweden, the social safety net is able to mitigate the effects of early-life health on labor market outcomes during economic downturns.