Effects of Parental Death on Labor Market Outcomes

Abstract

Nearly everyone experiences the death of a parent in adulthood, but little is known about its effects on adult children’s labor market outcomes and the underlying mechanisms. In this paper, we use Danish administrative data to examine the impact of parental loss on individual labor market outcomes. We leverage the timing of sudden, first parental deaths and adopt a matched-control difference-in-differences strategy. Our findings show that parental death negatively affects adult children’s earnings: sons' earnings decline by 2% five years after parental loss, while daughters' earnings decrease by 3% during the same period. Exploring the underlying mechanisms, we find that both men’s and women’s mental health deteriorates following parental loss: women seek psychological assistance more frequently, while both men and women increase their use of mental health and opioid prescriptions. Furthermore, women with young children experience a comparatively larger earnings decline (around 4%) due to the loss of informal childcare. These findings collectively highlight a substantial labor market penalty for individuals who experience parental death.