The Economics of Grief

We study the short-run and long-run economic impact of one of the largest losses that an individual can face; the death of a child. We utilize unique merged registers on the entire Swedish population, combining information on the date and cause of death with parental outcomes. We exploit the longitudinaldimension of the data and deal with a range of selection issues. Losing a child has persistent adverse effects on labor income in employment, on being in the labor market, and on marital status. Even after six years, the annual income loss is about 10%. Child loss causes 4% of those employed at the time of the child loss to be out of work five years later, mostly due to exit out of the labor force. Effects on hospitalization due to mental illness are only short-term. The value of policy measures aimed at preventing mortal accidents of children is seriously underestimated if it does not take bereavement effects on parents into account.