Non-Technical Summary:
Many studies have demonstrated a causal effect of ill health on labour-supply, whereby individuals with poor health or who experience health difficulties are less likely to participate in the labour market. In this study, I explore whether the labour-supply of individuals with different personalities –measured by control beliefs– responds differently to health shocks (measured by whether was admitted to hospital for 10 nights or more).
To accomplish this, I follow the labour-supply trajectories of 649 initially full-time employed and healthy men who experience at some point in time an episode of ill health. The longitudinal data necessary to do so come from the German Socio-Economic Panel (SOEP), and spans years 1994 to 2012.
My findings provide clear evidence of personality differences in labour supply responses to health shocks amongst German men. When compared with men who have positive control beliefs, men with negative control beliefs are on average 100% more likely to drop out of the labour force after a health shock. This drop out is unrelated to early retirement. In addition, when compared with men who have positive control beliefs, men with negative control beliefs work on average 12% fewer hours per week over the year when experiencing a health shock.
These behavioural differences are strongest for men from low socioeconomic backgrounds, men who do not have access to private health insurance, and men who experience high intensity shocks to their health. Different labour-supply responses are also observed for conscientiousness and risk tolerance, traits that have been linked with willingness to invest and treatment compliance.
Teaching individuals the ability to interpret experiences in an optimistic fashion and to understand the importance of taking self-responsibility could be a cost-effective way to counter-balance rising health care costs associated with an aging society and with increasing prevalence rates of avoidable illnesses (such as obesity, diabetes and cardiovascular disease). This would require interventions at the person or community level, with the possibility that such interventions begin during infancy and teenage years.