Health shocks, employment and income in the Spanish labour market.

This paper investigates the relationship between health shocks and labour outcomes in the Spanish population using the European Community Household Panel. In order to control for the non-experimental nature of the data we use difference in difference and matching techniques. Our results suggest that there is a significant effect running from health to the probability of employment and to labour income. Moreover, while we cannot investigate the influence of childhood events and other phenomena that trigger long run causal pathways from socio-economic status to health, we are able to find a significant reduction in the probability of reporting good health in individuals who transit out of employment in comparison with individuals who are otherwise identical in terms of reported health status at the time of the transition. Copyright 2006 John Wiley & Sons, Ltd.