The Effects of Health Shocks on Time Spent in Home Production

This paper examines the causal impact of health shocks on time spent in home production among retired individuals. Two channels with opposite predictions motivate the analysis: health shocks may tighten household budgets, inducing substitution toward home-produced goods (income effect), or they may reduce the physical and functional capacity to perform domestic tasks (impairing effect). Using longitudinal data from the Health and Retirement Study, I estimate condition-specific causal effects of ten health conditions on home production in a staggered difference-in-differences design. Conditions that impair functional capacity, such as psychiatric conditions, depression on the Center for Epidemiological Studies Depression (CES-D) scale, and adverse self-reported health, reduce home production substantially. Psychiatric conditions reduce weekly home production by 3.2 hours, a 16% decline; CES-D depression and self-reported health shocks each reduce it by approximately 1 hour per week. Conditions that raise out-of-pocket medical costs but impose modest functional limitations produce no increase. The evidence therefore supports the impairing effect and gives no support to the income effect. The decline is not fully offset by increased help utilization or by spending on market substitutes such as housekeeping services, prepared meals, and yard work. Health shocks thus impose welfare costs beyond what monetary measures alone capture, with direct implications for the design of home- and community-based support services for retirees.