Household and individual economic outcomes of different health shocks: The role of medical innovations

TL;DR

This paper investigates how medical innovations reduce the economic impact of health shocks on individuals and their partners, highlighting significant spillover effects and implications for economic inequality.

Contribution

It provides causal evidence using longitudinal data and a triple differences design to show the economic benefits of medical innovations on health shocks.

Findings

Medical innovation mitigates negative economic effects of health shocks.

Spillover effects benefit partners' economic outcomes.

Medical innovation reduces health-related economic inequalities.

Abstract

This study provides new evidence on how medical care mitigates the economic consequences of health shocks for individuals and their partners. To identify causal effects, I focus on medical scientific discoveries and exploit longitudinal administrative data for Sweden, using a triple differences design. The results indicate that medical innovation strongly mitigates the negative economic consequences of health shocks for individuals and have spillover effects on their partners. These spillovers are relatively large because medical innovation compensates for partners wage losses in conditions when welfare support for caregiving is insufficient. Overall, the findings indicate that medical innovation not only produces substantial economic gains but also reduces disease-related economic inequalities.