Household and individual economic responses to different health shocks: the role of medical innovations

This study provides new evidence regarding the extent to which medical care mitigates the economic consequences of various health shocks. To obtain causal effects, I focus on the role of medical scientific discoveries and leverage the longitudinal dimension of unique administrative data on adults in Sweden, their partners, and their working-age children. The results indicate that medical innovations strongly mitigate the negative economic consequences of a health shock, including subsequent losses for the individual and close relatives, and income inequalities within these groups. Such mitigating effects are highly heterogeneous across diseases that cause health shocks. These results support the view that the economic repercussions of health shocks have been overlooked, and there is a lack of focus on the efficiency of medical care for specific health conditions.