The Effects of catastrophic health expenditure on the labor supply of individuals

Abstract

Among various factors that can affect labor supply, health expenditure also plays an essential role because depends on the size of health expenditure, we can presume the seriousness of the disease and possible side effects of health expenditure on household finance as well. However, forming a direct causal relationship between health expenditure and labor supply is complex, since there are other health factors that can affect the effects of health expenditure on labor choice of individuals. In addition, relatively trivial size of health expenditure may not provide a meaningful intuition about the effect on labor supply. Thus, this study focuses on the effects of catastrophic health expenditure (CHE), the health expenditure that exceeds a certain proportion of the capacity to pay, on the employment status of individuals while controlling for the existence of family member who is experiencing either serious disease or chronic disease. Regression results provide strong statistical evidence that catastrophic health expenditure is strongly associated with decreasing probability of an individual to be in employment status. The effects of having family members with either chronic or serious disease are varying by individual characteristics, especially when the sample is distinguished by gender. Given a family member experiences either chronic or serious disease, women are less likely to diminish their employment when the family member experiences chronic disease. On the other hand, the effect of the disease status of a family member does not statistically influence the employment status of men, but only when the family member experiences both chronic and serious disease. CHE has significant negative effects on the employment of individuals, but the effects of the disease status of the family member on the individual’s employment status vary by gender.