Husband's health and wife's labor supply

This paper examines the labor supply response of the wife to deterioration in the husband's health. Unlike past cross-sectional studies, responses over time are directly examined through the use of longitudinal data. The empirical results suggest that the magnitude and direction of the response depend crucially on the attractiveness of transfers which the family may qualify for when the husband's health deteriorates. When no transfers are available the wife increases her market work in order to replace the lost earnings of the husband. However, as transfers become more attractive, the wife begins to reduce her labor supply, enabling her to spend more time at home caring for her husband.