The impact of health on wages: evidence for Europe

  • Ana Rodriguez-Alvarez
  • César Rodriguez-Gutierrez
Original Research

Abstract

This paper analyses the effects of health on wages in sixteen European countries using production frontier methodology. It is assumed that workers have a potential income/productivity which basically depends on their human capital, but due to several health problems, situations could exist where workers fail to reach their potential income frontier. The estimation of a true-random-effects model allows us to conclude that the potential hourly wage of workers is significantly influenced by their level of education and their job experience. However, health problems, especially those strongly influencing work activities, contribute towards an individual not attaining the potential income which would otherwise be guaranteed by their human capital endowment. Suffering a strong limitation reduces gross wage per hour by 6.1%. This wage reduction is also observed in the case of a weak limitation, but here the wage difference with respect to workers without any limitation is 2.6%. Additionally, other factors, such as being a woman, the economic cycle or having a temporary contract, appear to distance an individual from their wage frontier.

Keywords

Wages Health Human capital Mincer equations Stochastic frontiers Heteroscedasticity 

JEL codes

J24 J31 I10 

Notes

Acknowledgements

The authors acknowledge financial support from the project ECO2017-86402-C2-1-R (Ministry of Economy and Competitiveness) and the project “Oviedo Efficiency Group” FC-15-GRUPIN14-048 (FEDER and Principality of Asturias). This article is based on data from Eurostat, EU Statistics on Income and Living Conditions (2008–2011). The responsibility for all conclusions drawn from the data lies entirely with the authors.

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interest.

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Economics DepartmentUniversity of OviedoOviedoSpain

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