The Impact of Children's Health Shocks on Parents' Labor Earnings and Mental Health

Abstract We provide novel evidence on the causal impact of a child's health shock on parents' labor market outcomes. Using high-quality Finnish and Norwegian administrative data, we construct counterfactuals for treated households with families who experience the same shock in later years. We find a sharp break in mothers' earnings trajectories after the event, while we do not find significant effects for fathers. Our findings do not align with the hypothesis of household specialization explaining these adjustments. Instead, the evidence suggests that these changes are driven by increased caregiving demands, with mothers bearing the primary burden. We also document a substantial impact on parents' mental well-being.