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Health and Wages - Panel data estimates considering selection and endogeneity

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  • Robert Jäckle

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.

Suggested Citation

  • Robert Jäckle, 2007. "Health and Wages - Panel data estimates considering selection and endogeneity," ifo Working Paper Series 43, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
  • Handle: RePEc:ces:ifowps:_43
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    References listed on IDEAS

    as
    1. (*), 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.
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    More about this item

    Keywords

    Health; wages; fixed effects; sample selection; instrumental variables;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • I10 - Health, Education, and Welfare - - Health - - - General
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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