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Health and the Decision to Invest in Education

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Author Info

  • Brit S. Schneider

    () (University of Bayreuth)

  • Udo Schneider

    () (University of Bayreuth)

  • Volker Ulrich

    () (University of Bayreuth)

Abstract

The paper analyses the relationship between health and education in a two period human capital framework. The resulting substitution and investment effects between health and advanced training work in opposite direction and leave open questions for the empirical part. As econometric model we use a random effects probit model for panel date. Our data consist of 322 individuals for the two years 2004 and 2006. Thereby, we take into account that self-reported measures of health are usually vulnerable to a reporting bias due to anticipation and measurement errors. Estimation results show a dominant substitution effect between different levels of education, indicating that good health implies higher learning efficiency so that the same income can be achieved with lower investment in advanced training. In contrast, we find a dominant investment effect within an educational level, indicating that better health leads individuals with higher education to invest more in additional training.

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Bibliographic Info

Article provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.

Volume (Year): 227 (2007)
Issue (Month): 5+6 (December)
Pages: 725-745

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Handle: RePEc:jns:jbstat:v:227:y:2007:i:5-6:p:725-745

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Related research

Keywords: Investments in education; health capital stock; panel data;

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References

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  1. Andrew M. Jones, 2007. "Panel data methods and applications to health economics," Health, Econometrics and Data Group (HEDG) Working Papers 07/18, HEDG, c/o Department of Economics, University of York.
  2. Matthias Nübling & Hanfried H. Andersen & Axel Mühlbacher & Jürgen Schupp & Gert G. Wagner, 2007. "Computation of Standard Values for Physical and Mental Health Scale Scores Using the SOEP Version of SF12v2," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 171-182.
  3. Richard Disney & Carl Emmerson & Matthew Wakefield, 2003. "Ill health and retirement in Britain: a panel data based analysis," IFS Working Papers W03/02, Institute for Fiscal Studies.
  4. Don Webber, 2002. "Policies to stimulate growth: should we invest in health or education?," Applied Economics, Taylor and Francis Journals, vol. 34(13), pages 1633-1643.
  5. Cristina Hernandez-Quevedo & Andrew M Jones & Nigel Rice, . "Reporting Bias and Heterogeneity in Self-Assessed Health. Evidence from the British Household Panel Survey," Discussion Papers 04/18, Department of Economics, University of York.
  6. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
  7. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
  8. Williams, Joseph T, 1979. "Uncertainty and the Accumulation of Human Capital over the Life Cycle," The Journal of Business, University of Chicago Press, vol. 52(4), pages 521-48, October.
  9. Brown, Eleanor & Kaufold, Howard, 1988. "Human Capital Accumulation and the Optimal Level of Unemployment Insurance Provision," Journal of Labor Economics, University of Chicago Press, vol. 6(4), pages 493-514, October.
  10. Levhari, David & Weiss, Yoram, 1974. "The Effect of Risk on the Investment in Human Capital," American Economic Review, American Economic Association, vol. 64(6), pages 950-63, December.
  11. Case, Anne & Fertig, Angela & Paxson, Christina, 2005. "The lasting impact of childhood health and circumstance," Journal of Health Economics, Elsevier, vol. 24(2), pages 365-389, March.
  12. Paul Glewwe, 2002. "Schools and Skills in Developing Countries: Education Policies and Socioeconomic Outcomes," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 436-482, June.
  13. Anderberg, Dan & Andersson, Fredrik, 2000. "Social Insurance with Risk-Reducing Investments," Economica, London School of Economics and Political Science, vol. 67(265), pages 37-56, February.
  14. Ronald Hagan & Andrew M. Jones & Nigel Rice, 2006. "Health and retirement in Europe," Health, Econometrics and Data Group (HEDG) Working Papers 06/10, HEDG, c/o Department of Economics, University of York.
  15. Brunello, Giorgio, 2000. "Absolute Risk Aversion and the Returns to Education," IZA Discussion Papers 192, Institute for the Study of Labor (IZA).
  16. Snow, Arthur & Warren, Ronald S, Jr, 1990. "Human Capital Investment and Labor Supply under Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 195-206, February.
  17. Selma J. Mushkin, 1962. "Health as an Investment," Journal of Political Economy, University of Chicago Press, vol. 70, pages 129.
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Cited by:
  1. Brit S. Schneider & Udo Schneider, 2009. "Determinants and Consequences of Health Behaviour: New Evidence from German Micro Data," SOEPpapers on Multidisciplinary Panel Data Research 253, DIW Berlin, The German Socio-Economic Panel (SOEP).

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