Health and work in the family: Evidence from spouses’ cancer diagnoses

•How does one spouse's health shock affect the other spouse's employment and earnings?•We answer this theoretically ambiguous question using cancer diagnoses as health shocks.•We combine administrative data from the Canadian cancer registry and tax returns.•Men and women are 2.5%-age points less likely to work after their spouses’ diagnoses.•Total family income decreases substantially following one spouse's cancer diagnosis. Using Canadian administrative data from multiple sources, we provide the first nationally representative estimates for the effect of spouses’ cancer diagnoses on individuals’ employment and earnings and on family income. Our identification strategy exploits unexpected health shocks and combines matching with individual fixed effects in a generalized difference-in-differences framework to control for observable and unobservable heterogeneity. While the effect of spousal health shocks on labor supply is theoretically ambiguous, we find strong evidence for a decline in employment and earnings of individuals whose spouses are diagnosed with cancer. We interpret this result as individuals reducing their labor supply to provide care to their sick spouses and to enjoy joint leisure. Family income substantially declines after spouses’ cancer diagnoses, suggesting that the financial consequences of such health shocks are considerable.