UC Berkeley

In the absence of widespread social safety nets during China's economic transition, households were often left to self-insure against the risk of adverse health events. I investigate the impacts of health shocks to oneself and to one's spouse on time contributions to home production activities, which are often overlooked, but may have important opportunity cost, as well as time in market labor. Using six waves of the China Health and Nutrition Survey (1991 - 2006), I estimate the short-run effect of a health shock--defined as a transition from non-poor self-reported health status to poor health status--on hours per day spent in home production and market work.

Results show that experiencing a negative health shock corresponds with about a 1.5 hour per day reduction in market time for men and the elderly. Decomposing the labor supply decision into participation and conditional hours shows that much of the reduction in hours is due to a 10 percentage point increase in the likelihood of dropping out of the labor force. A health shock also reduces the likelihood of continuing home production by 4 percentage points for all people. When spouses become ill, market labor time increases for employed individuals, driven by a significant 2 percentage point increase in the likelihood of continuing to work for both husbands and wives. Men also significantly increase home production by 0.5 hours per day when wives become sick and total household production time is unaffected. However, when husbands suffer health problems, wives are more likely to continue working by 5 percentage points, but it is not enough to offset the loss in the husband's market time and total household market time significantly declines by 2.3 hours per day. Large reductions in total household production time are also observed for poorer households, those of the elderly and of private sector workers, which suggests some benefits to weathering health shocks associated with household savings and employment in state-owned enterprises and collectives.

Given that individuals spend an average of 9.2 hours in market labor and 2.7 hours in home production each day if they participate in both activities, these effects on market labor hours may also be economically significant while the smaller effects on home production time may be substantively less important. Implications for social welfare policies are discussed.