Heterogeneity analyses reveal large differences across different groups of the population: Older workers, as well as low educated and blue-collar workers are affected particularly hard. As a result, health shocks may exacerbate existing labor market inequalities.

In the paper, we propose a novel method to detect and disentangle moderate and severe health shocks based on a data-driven classification of sickness absences and hospitalizations. We find that severe health shocks have persistent effects on employment and labor earnings.

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