The impact of childhood health shocks on parental labor supply

Abstract

We leverage the onset of type 1 diabetes (T1D) in childhood to estimate the impact of a childhood health shock on parental labor supply. T1D is the second most common childhood chronic physical health condition, inheritability is low, the exact cause is unknown, the onset is unpredictable, and receiving treatment is crucial to survival. Using Danish administrative registry data with both an event study and difference-in-differences analysis shows that mothers shift to part-time work, marginally shift from the private to public sector, and experience a long-term 4-5% decrease in wage income. The dynamic effects reveal large initial impacts, but the magnitudes decrease (although are not eliminated) over time. Fathers do not experience any long-term reduction in wage income. This suggests part of the motherhood penalty is likely due to mothers bearing the economic burden when their child is diagnosed with a chronic health condition.