The impact of health on wages: Evidence from the British Household Panel Survey (original) (raw)

While income is generally considered an important determinant of health, little evidence has been o¨ered on the reverse relationship, particularly for developed economies. This paper considers the e¨ect of self-assessed general and psychological health on hourly wages using longitudinal data from six waves of the British Household Panel Survey. We employ single equation ®xed e¨ects and random e¨ects instrumental variable estimators suggested by , . Our results show that reduced psychological health reduces the hourly wage for males, while excellent self-assessed health increases the hourly wage for females. We also ®nd the health variables to be positively correlated with the time-invariant individual e¨ect. Further, we con®rm the ®ndings of previous work which suggested that the majority of the e½ciency gains from the use of the instrumental variables estimators fall on the time-invariant endogenous variables, in our case academic attainment, and add further support to the hypothesis of a negative correlation between educational attainment and individual characteristics which a¨ect wages.