Effects of Parental Death on Labor Market Outcomes and Gender Inequalities

Abstract

Nearly everyone experiences the death of a parent in adulthood, but little is known about the effects of parental death on adult children’s labor market outcomes and the underlying mechanisms. In this paper, we utilize Danish administrative data to examine the effects of losing a parent on individual labor market outcomes and its contribution to gender earnings inequalities. Our empirical design leverages the timing of sudden, first parental deaths, allowing us to focus on the health and family support channels. Our findings reveal that the death of a parent has enduring negative effects on the earnings of both adult sons and daughters, with the effects being more pronounced for daughters. Moreover, the negative impact of mothers' deaths on daughters' earnings outweighs that of fathers' deaths. Consequently, mothers' deaths can account for 10% of the aggregate gender earnings gap. Our analysis demonstrates that both the mental health and family support channels are at play. Specifically, we observe that women are relatively more inclined to seek psychological assistance, while men tend to receive more mental health-related and opioid prescriptions following the loss of a parent. Additionally, we find that women with young children experience a comparatively larger drop in earnings after parental death due to the loss of informal childcare.