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How does heterogeneity shape the socioeconomic gradient in health satisfaction?

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  • Andrew M. Jones
  • Stefanie Schurer

Abstract

Individual heterogeneity plays a key role in explaining variation in self-reported well-being and, in particular, health satisfaction. It is hypothesised that the influence of this heterogeneity varies over levels of health and increases over the life-cycle. These hypotheses are tested with data on health satisfaction from 22 waves of the German Socioeconomic Panel (GSOEP).Nonlinear fixed effects methods that allow for unobserved heterogeneity are not readily available for categorical measures of well-being. One common solution is to revert to conditional fixed effects methods, at the price of a high degree of information loss. Another common solution is to ignore the association between unobserved heterogeneity and socio-economic status by using pooled or random effects models, at the price of potential bias.We use a generalization of the conditional fixed effects logit, that allows for individual-specific reporting bias, heterogeneity in health endowments, and heterogeneity in the impact of income on health satisfaction. Adjusting for unobserved heterogeneity accounts for the relationship between income and very good health, but not between income and poorer health states. The income gradient for older age-groups is more strongly affected by controlling for unobserved heterogeneity: revealing an increasing influence of heterogeneity on health satisfaction over the life-span.

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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 26 (2011)
Issue (Month): 4 (06)
Pages: 549-579

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Handle: RePEc:wly:japmet:v:26:y:2011:i:4:p:549-579

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Cited by:
  1. Fertig, Michael & Schurer, Stefanie, 2007. "Labour Market Outcomes of Immigrants in Germany: The Importance of Heterogeneity and Attrition Bias," IZA Discussion Papers 2915, Institute for the Study of Labor (IZA).
  2. Deborah A. Cobb‐Clark & Stefanie Schurer, 2013. "Two Economists' Musings on the Stability of Locus of Control," Economic Journal, Royal Economic Society, vol. 0, pages F358-F400, 08.
  3. Schurer, Stefanie & Yong, Jongsay, 2012. "Personality, well-being and the marginal utility of income: What can we learn from random coefficient models?," Working Paper Series 2040, Victoria University of Wellington, School of Economics and Finance.
  4. Benjamin Artz, 2010. "Fringe benefits and job satisfaction," International Journal of Manpower, Emerald Group Publishing, vol. 31(6), pages 626-644, September.
  5. Stefanie Schurer, 2008. "Discrete Heterogeneity in the Impact of Health Shocks on Labour Market Outcomes," Ruhr Economic Papers 0071, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  6. Nakamura, Sayaka, 2014. "Parental income and child health in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 32(C), pages 42-55.
  7. William H. Greene & Mark N. Harris & Bruce Hollingsworth, 2014. "Inflated Responses in Measures of Self-Assessed Health," Working Papers 14-12, New York University, Leonard N. Stern School of Business, Department of Economics.
  8. Stefanie Schurer & Jongsay Yong, 2010. "Personality, Well-being and Heterogeneous Valuations of Income and Work," Melbourne Institute Working Paper Series wp2010n14, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  9. Jesús M. Carro & Alejandra Traferri, 2011. "State dependence and heterogeneity in health using a bias corrected fixed effects estimator," Economics Working Papers we1118, Universidad Carlos III, Departamento de Economía.
  10. Cubi-Molla, P. & Jofre-Bonet, M. & Serra-Sastre, V., 2013. "Adaptation to Health States: A Micro-Econometric Approach," Working Papers 13/02, Department of Economics, City University London.
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  12. Fernández-Val, Iván & Savchenko, Yevgeniya & Vella, Francis, 2013. "Evaluating the Role of Individual Specific Heterogeneity in the Relationship Between Subjective Health Assessments and Income," IZA Discussion Papers 7651, Institute for the Study of Labor (IZA).
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