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Estimates of the asset-effect: The search for a causal effect of assets on adult health and employment outcomes

  • Abigail McKnight
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    In this paper we seek to determine the effect of assets held in early adult life on later outcomes. We specifically look at wages, employment prospects, general health and Malaise. The identification of an asset-effect throws up a number of statistical challenges as asset holding is not random. We employ a number of statistical techniques in our search for the causal effect of assets on adult health and employment outcomes. We find that simple Ordinary Least Squares and probit estimates of the asset effect are indeed biased in many cases. However, after applying a battery of techniques to remove such biases, the conclusion is that within the cohort examined (born in 1958), early asset holding does have positive effects on later wages, employment prospects, excellent general health and in reducing malaise.

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    Paper provided by Centre for Analysis of Social Exclusion, LSE in its series CASE Papers with number case149.

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    Date of creation: Jun 2011
    Date of revision:
    Handle: RePEc:cep:sticas:case149
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    1. Laurence J. Kotlikoff, 1989. "What Determines Savings?," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262611872, June.
    2. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
    3. James J. Heckman & Justin L. Tobias & Edward Vytlacil, 2000. "Simple Estimators for Treatment Parameters in a Latent Variable Framework with an Application to Estimating the Returns to Schooling," NBER Working Papers 7950, National Bureau of Economic Research, Inc.
    4. Cox, Donald & Jappelli, Tullio, 1990. "Credit Rationing and Private Transfers: Evidence from Survey Data," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 445-54, August.
    5. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, December.
    6. Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
    7. Joachim Inkmann, 2001. "Accounting for Nonresponse Heterogeneity in Panel Data," CoFE Discussion Paper 01-03, Center of Finance and Econometrics, University of Konstanz.
    8. Richard Blundell & Monica Costa Dias, 2008. "Alternative approaches to evaluation in empirical microeconomics," CeMMAP working papers CWP26/08, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    9. Richard Chiburis & Michael Lokshin, 2007. "Maximum likelihood and two-step estimation of an ordered-probit selection model," Stata Journal, StataCorp LP, vol. 7(2), pages 167-182, June.
    10. repec:tpr:qjecon:v:105:y:1990:i:1:p:187-217 is not listed on IDEAS
    11. Dolton, P. J. & Makepeace, G. H., 1987. "Interpreting sample selection effects," Economics Letters, Elsevier, vol. 24(4), pages 373-379.
    12. Banks, James & Rohwedder, Susann, 2001. "Life-cycle saving patterns and pension arrangements in the U.K," Research in Economics, Elsevier, vol. 55(1), pages 83-107, March.
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