Effects of Health Shocks on Adult Children's Labor Market Outcomes and Well‐Being

ABSTRACT Using Norwegian administrative register data, we assess the impact of unexpected health shocks hitting lone parents on offspring's labor market outcomes and well‐being. We use first‐time hip fractures or strokes as indicators of parental health shocks and estimate both the overall effects and the heterogeneous impacts by the survival time of the affected parent. We identify small, but significant, immediate responses in terms of an increase in physician‐certified sickness absences and a higher risk of diagnosed mental disorders. The short‐term effects are larger for offspring whose parents die shortly after the shock. Most of the effects fade out quickly, and the negative impacts on subsequent employment and earnings are small and only borderline statistically significant. In general, our results suggest that the responses to the deteriorating health of a parent tend to be short‐lived and mostly manifest as temporary absences from work rather than complete detachment from the labor market.