Local Labor Markets and Health at Birth

Health outcomes at birth strongly predict later-life health, education and labor market outcomes. Yet, our understanding of the economic factors determining newborns’ health outcomes is still limited. We provide new insights into this topic by examining the impact of economic downturns on health at birth in Germany for the period 2005-2013. In particular, we advance the literature by assessing new and more refined measures of health status using high quality hospital register micro data and by focusing on the timing of the local unemployment shocks prior to and during the pregnancy. The existing literature hints towards a positive relationship between the local unemployment rate and newborns’ health in developed countries. In contrast, our results indicate a pro-cyclical relationship between the economic conditions and newborns’ health outcomes.

Our analysis is based on a unique panel data that we generate by matching monthly unemployment rates with diagnosis-level hospital register data, vital statistics, pollution data, and further regional demographic controls. It covers the universe of newborn hospital cases in 245 travel-to-work-areas (TTWA). In our main specification, we employ a fixed effects estimation accounting for year-month and TTWA fixed effects, demographic controls, and a linear TTWA-specific time trend. We use lagged unemployment rates to distinguish between the economic conditions prior to conception and during pregnancy.

Our results reveal that regional unemployment shocks during pregnancy have detrimental effects on health outcomes of infants at birth. In particular, worsened local labor market conditions increase the prevalence of hospital admissions of newborns due to health problems/illnesses that have their origin in the perinatal period. Moreover, we observe that rises in local unemployment during pregnancies reduce average birth weight and ponderal index. These results are mainly driven by the impact of economic conditions in the second half of the pregnancy. While the unemployment rate prior to conception leads to a decrease in fertility it also gives rise to newborn health problems. Investigating potential mechanisms, we conjecture that the negative health effects cannot (solely) be explained by parental selection by age, marital status, and birth parity, or environmental pollution.

In contrast to the existing literature, our results indicate a pro-cyclical relationship between the economic conditions and health outcomes at birth: newborns whose mothers have been exposed to rises in local unemployment during pregnancy suffer on average from worse health conditions at the very onset of their life. The results are likely to be driven by maternal stress, behavior detrimental to health or a combination of both following the economic uncertainty and potential losses of income.