Effects of Health on Wages of Australian Men

Melbourne Institute Working Paper No. 02/07

35 Pages Posted: 23 Jun 2007

See all articles by Lixin Cai

Lixin Cai

University of Melbourne - Melbourne Institute: Applied Economic & Social Research

Date Written: March 2007

Abstract

As a form of human capital health like education determines individuals' productivity and thus wage rates. While there are numerous overseas studies that examine the effect of health on wages, research on this issue using Australian data is scarce. This paper uses the Household, Income and Labour Dynamics in Australia (HILDA) survey to investigate the effect of health on the wages of working-age Australian men. A simultaneous equation model of health and wages is estimated to account for endogeneity of health. The results confirm the finding in the literature that health has a significant and positive effect on wages, but the significant effect is found only when measurement error and endogeneity of health are accounted for. The reverse effect of wages on health is found insignificant, but there is evidence on the endogeneity of health arising from unobserved factors.

Keywords: Effects of health on wages, endogeneity, selection bias, simultaneous equation model

JEL Classification: J31, I12

Suggested Citation

Cai, Lixin, Effects of Health on Wages of Australian Men (March 2007). Melbourne Institute Working Paper No. 02/07, Available at SSRN: https://ssrn.com/abstract=995975

Lixin Cai (Contact Author)

University of Melbourne - Melbourne Institute: Applied Economic & Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

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