Health shocks, disability and work

This paper focuses on the relation between health shocks and the onset of a disability and employment outcomes. We estimate an event-history model using data from the British National Child Development Study (NCDS), where accidents causing a unscheduled hospitalization are the measure for unanticipated health shocks. Our results show that experiencing such a health shock substantially increases the likelihood of the onset of a disability, while it does not have direct effects on employment at later ages. This finding is used to simulate the causal effects of the onset of a disability on later employment outcomes. These simulations show that about two-third of the association between disability and employment can be explained by the causal effect of the onset of a disability on employment. The remaining one-third is selection. For men and lower-educated workers the association is mainly explained by the causal effect, while for women selection is more important.