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Health and Wages - Panel data estimates considering selection and endogeneity

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Author Info
Robert Jäckle

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Abstract

This paper investigates the effects of health on wages by controlling for a number of problems: first, the unobservable genetic endowment may cause an omitted variable bias; second, using a self-reported health variable could induce measurement error; third, the issue of reverse causality arises; and fourth, panel attrition driven by the endogenous decision to participate in the labour market may result in inconsistent estimation. By using recently developed methods, I control for all of the above issues in one framework. The results show that good health raises wages for both women and men. I find the health variable to suffer from measurement error. In the male sample, applying OLS or 2SLS, instead of methods accounting for selection and individual heterogeneity, causes an upward bias in the health coefficient.

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Publisher Info
Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 43.

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Date of creation: 2007
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Handle: RePEc:ces:ifowps:_43

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Related research
Keywords: Health; wages; fixed effects; sample selection; instrumental variables;

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models
I10 - Health, Education, and Welfare - - Health - - - General
J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January. [Downloadable!] (restricted)
  2. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281. [Downloadable!] (restricted)
  3. Lynn M Gambin, 2005. "The impact of health on wages in Europe – does gender matter?," Health, Econometrics and Data Group (HEDG) Working Papers 05/03, HEDG, c/o Department of Economics, University of York. [Downloadable!]
  4. Ekaterini Kyriazidou, 1997. "Estimation of a Panel Data Sample Selection Model," Econometrica, Econometric Society, vol. 65(6), pages 1335-1364, November.
  5. Paul Contoyannis & Andrew M. Jones & Nigel Rice, 2004. "The dynamics of health in the British Household Panel Survey," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(4), pages 473-503. [Downloadable!]
  6. (*), Nigel Rice & Paul Contoyannis, 2001. "The impact of health on wages: Evidence from the British Household Panel Survey," Empirical Economics, Springer, vol. 26(4), pages 599-622. [Downloadable!] (restricted)
  7. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-59, July. [Downloadable!] (restricted)
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  8. Timothy J Halliday, 2005. "Heterogeneity, State Dependence and Health," Working Papers 200503, University of Hawaii at Manoa, Department of Economics. [Downloadable!]
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  9. Verbeek, Marno & Nijman, Theo, 1992. "Testing for Selectivity Bias in Panel Data Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(3), pages 681-703, August. [Downloadable!] (restricted)
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  10. Laura Romeu Gordo, 2006. "Effects of short- and long-term unemployment on health satisfaction: evidence from German data," Applied Economics, Taylor and Francis Journals, vol. 38(20), pages 2335-2350, November. [Downloadable!] (restricted)
  11. Christian Dustmann & María Engracia Rochina-Barrachina, 2007. "Selection correction in panel data models: An application to the estimation of females' wage equations," Econometrics Journal, Royal Economic Society, vol. 10(2), pages 263-293, 07. [Downloadable!] (restricted)
  12. Haveman, Robert & Wolfe, Barbara & Kreider, Brent & Stone, Mark, 1994. "Market work, wages, and men's health," Journal of Health Economics, Elsevier, vol. 13(2), pages 163-182, July. [Downloadable!] (restricted)
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  13. Wooldridge, Jeffrey M., 1995. "Selection corrections for panel data models under conditional mean independence assumptions," Journal of Econometrics, Elsevier, vol. 68(1), pages 115-132, July. [Downloadable!] (restricted)
  14. Lixin Cai, 2007. "Effects of Health on Wages of Australian Men," Melbourne Institute Working Paper Series wp2007n02, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
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  15. Lee, Lung-Fei, 1982. "Health and Wage: A Simultaneous Equation Model with Multiple Discrete Indicators," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(1), pages 199-221, February. [Downloadable!] (restricted)
  16. María Engracia Rochina-barrachina, 1999. "A New Estimator for Panel Data Sample Selection Models," Annales d'Economie et de Statistique, ADRES, issue 55-56, pages 07, Juillet-D. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pouliakas, Konstantinos & Panos, Georgios & Zangelidis, Alexandros, 2009. "The Inter-Related Dynamics of Dual Job Holding, Human Capital and Occupational Choice," MPRA Paper 16859, University Library of Munich, Germany. [Downloadable!]
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