Essays on early life circumstances, health and labor market outcomes in Europe

Abstract

This thesis investigates the widely documented positive association between health and socioeconomic status (SES) in adulthood, often referred to as the SES-health gradient in the literature (Marmot and Wilkinson, 1999; Smith, 1999), and it does so in two ways. First, as discussed in Currie and Madrian's (1999) survey in the Handbook of Labor Economics, (adult) health is a major determinant of (adult) labor market outcomes such as wages, hours and labor force participation, which themselves are key components of an individual's (adult) SES. Chapter 1, "What do wages add to the health-employment nexus? Evidence from older European workers", adds to this research by quantifying the role of individual wage rates in the health-employment nexus, an issue that, although previously highlighted by Cai (2009, 2010), has received virtually no attention in the empirical literature (e.g., Haveman et al., 1994). In particular, I measure the direct effect of health and the indirect effect of health through wages on employment. Chapter 2, "The impact of health on wages: Evidence from Europe before and during the Great Recession", focuses more closely on the direct effect of health on wages by implementing a recent estimation method proposed by Semykina and Wooldridge (2010) which addresses the problems unobserved heterogeneity, nonrandom sample selection and measurement error (in the self-reported health variable) in one comprehensive framework. Moreover, by using data from before and during the Great Recession -which started in Europe in 2008 (Arpaia and Curci, 2010)- I gain insights into how the current crisis has altered the relationship between health and wages. Still, and more generally, an understanding of the effects of health on labor market outcomes is especially important in regions with aging populations, as is the case across Europe (United Nations, 2009), something that will only become more pressing over time as more individuals reach the age where health has the greatest impact on labor market outcomes (Currie and Madrian, 1999). Chapter 1 uses individual-level panel data on older workers from the Survey of Health, Ageing, and Retirement in Europe (SHARE). Chapter 2 explores the impact of health on wages in the working-age population by using individual-level panel data from the European Union Statistics on Income and Living Conditions (EU-SILC), but also investigates if these effects differ between age groups. Second, there is a growing literature that demonstrates that the SES-health gradient in adulthood has its origins in an individual's early life (Case et al., 2002; Currie and Stabile, 2003). Two chapters of the most recent volumes of the Handbook of Labor Economics (Almond and Currie, 2011b; Black and Devereux, 2011), for instance, show that adverse health events in early life and parental SES have long-lasting effects on later life health and SES-related outcomes such as earnings and work effort. The last two chapters of this thesis use individual-level data from SHARE, and in particular from its third wave called SHARELIFE, to explore the relationship between early life circumstances and later life outcomes. Chapter 3, "The associations between early life circumstances and later life health and employment in Europe", provides estimates on the associations of early life circumstances -measured by childhood health and socioeconomic SES- with educational attainment, and later life health and employment (at ages 50-64). Apart from presenting new empirical evidence for thirteen European countries on the extent to which an individual's early life circumstances are associated with educational attainment and, once this latter is controlled for, with their later life health (at ages 50-64), this chapter examines the associations between early life circumstances and later life employment (at ages 50-64) once we control for education and later life health, which can be potential mediators of the associations between early life circumstances and later life employment. Finally, Chapter 4, "Early life circumstances and life-cycle labor market outcomes", investigates how early life circumstances -as measured by two indices of childhood health and SES- are associated with labor market outcomes over an individual's entire life-cycle. By taking such a life-cycle approach one gains insights not only into which labor market outcomes are associated with adverse childhood events but also into if these associations are already present early or appear only later in adult life and if these are reduced or reinforced with age.