Institutions, health shocks and labour outcomes across Europe

This paper investigates the relationship between health shocks and labour market outcomes in 9 European countries using the European Community Household Panel. Matching techniques are used to control for the non-experimental nature of the data. The results suggest that there is a significant causal effect from health on the probability of employment: individuals who incur a health shock are significantly more likely to leave employment and transit into disability. The estimates differ cross countries, with the largest employment effects being found in the Netherlands, Denmark, Spain and Ireland, and the smallest in France and Italy. Differences in social security arrangements help to explain these cross-country differences.