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Earnings persistence across generations: Transmission through health?

  • Eriksson, Tor

    ()

    (Aarhus School of Business, Department of Economics)

  • Bratsberg, Bernt

    ()

    (The Ragnar Frisch Centre for Economic Research)

  • Raaum, Oddbjørn

    ()

    (The Ragnar Frisch Centre for Economic Research)

Using a unique data set that links adult labour market outcomes and health status of a cohort of Danes and their parents, we study the interrelationships between transmission of health and economic status across generations. We first establish new evidence on intergenerational earnings resemblance in Denmark, obtaining estimates of father-child earnings elasticities of .29 for sons and .27 for daughters. Next, we show that children from low-income families are more likely to experience health problems in adulthood, and that poor health outcomes, such as back illness, heart disease, and psychological illness, affect labour earnings negatively. The data further reveal strong correlations of health outcomes across generations. When we condition on health status, estimates of the intergenerational earnings elasticity drop by a substantial amount—28 percent for sons and 25 percent for daughters. These findings point to parental investments in health and resemblance of health across generations as factors behind the pattern of low intergenerational earnings mobility observed in many countries.

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File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2005/Memo-35-2005.pdf
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Paper provided by Oslo University, Department of Economics in its series Memorandum with number 35/2005.

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Length: 26 pages
Date of creation: 30 Dec 2005
Date of revision:
Handle: RePEc:hhs:osloec:2005_035
Contact details of provider: Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
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  1. Janet Currie & Brigitte C. Madrian, 1998. "Health, Health Insurance and the Labor Market," JCPR Working Papers 27, Northwestern University/University of Chicago Joint Center for Poverty Research.
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