Harsh times : do stressors lead to labor market losses?

Abstract

This paper examines the links between stressful life events and labor market outcomes. We use twin data for Finnish men and women combined with register-based individual information on earnings, employment and social income transfers. The twin data allow us to account for shared environmental and genetic confounders. We measure the exposure to stressful life events in 1990. The labor market outcomes are measured during a 20-year follow-up over the period 1990–2009. Three findings stand out. First, stressors lead to worse labor market outcomes. Second, both men and women are distressed by labor market shocks, but they respond differently to marital problems and health shocks within the family. For example, women respond to marital problems by working more, whereas men respond similarly after facing a random health shock within the family. Third, the relationship between health shocks and labor market outcomes diminishes as time passes, whereas the consequences of labor market shocks are more permanent.