Diabetes and Young Adults' Labor Supply: Evidence from a Novel Instrumental Variable Strategy

This paper explores the extent to which a negative health condition limits US young adults' participation in the labor market. We first rely on medical evidence to develop a new set of instruments for diabetes incorporating both socioeconomic and genetic information. Exploiting the variation in glycated hemoglobin (HbA 1c), a measure of plasma glucose concentration available in Wave IV of the National Longitudinal Study of Adolescent to Adult Health (Add Health), we then empirically document no statistically significant effects of diabetes on employment probability among the Add Health sample. Subgroup results also yield no discernible patterns, with only some weakly significant and negative effects for the male and Hispanic subgroups. For further robustness checks, we relax an important yet untestable assumption in standard IV estimations to credibly bound the main effects of interest. By and large, the implications of diabetes on young adults' labor supply are less pronounced than what previous research implies. Our findings complement what is known about other populations, and lend support to the protective effects of parenting and the family environment on children's early-life labor market outcomes. To the extent that previous research has documented the negative effects of diabetes on employment among older adults, we provide some broader policy lessons that can be drawn from our IV estimates.