Liana Leach

Using nationally representative data from Household Income and Labour Dynamics in Australia, this paper examines the impact of poor health, family impaired health and family time on the labour market participation of couples aged 25–64. We address sample selection bias and endogeneity bias by employing instrumental variable Tobit models. Our findings indicate that health selection into the labour market occurs not only due to individual's own health but also due to other family members' health, and family time—which is largely determined by various family factors such as a presence of preschool children (childcare) and partner's major life events. We find a significant trade‐off between family unpaid time and labour market participation, which is augmented after correcting for endogeneity of family unpaid time in market time consideration. This supports our argument that health selection should be considered within the family context, in which each member makes decisions conditional not only on their own but also other family members' health and time resources.