Labour supply and informal care responses to health shocks within couples

Shocks to health have been shown to reduce labour supply for the individual affected. Less is known about household self-insurance through a partner’s response. Previous studies have presented inconclusive empirical evidence on the existence of a health-related Added Worker Effect, and results limited to labour and income responses. We use UK longitudinal data to investigate within households both the labour supply and informal care responses of an individual to the event of an acute health shock to their partner. Relying on the unanticipated timing of shocks, we combine Coarsened Exact Matching and Entropy Balancing algorithms with parametric analysis and exploit lagged outcomes to remove bias from observed confounders and time-invariant unobservables. We find no evidence of a health-related Added Worker Effect but a significant and sizeable Informal Carer Effect. This holds irrespective of spousal labour market position or household financial status and ability to purchase formal care provision, suggesting that partners’ substitute informal care provision for time devoted to leisure activities.