Essays on skills, health and human inequality

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URL:	https://madoc.bib.uni-mannheim.de/33362
URN:	urn:nbn:de:bsz:180-madoc-333622
Dokumenttyp:	Dissertation
Erscheinungsjahr:	2013
Ort der Veröffentlichung:	Mannheim, Germany
Hochschule:	Universität Mannheim
Gutachter:	Berg, Gerard J. van den
Datum der mündl. Prüfung:	4 Juli 2013
Sprache der Veröffentlichung:	Englisch
Einrichtung:	Fakultät für Rechtswissenschaft und Volkswirtschaftslehre > Alexander v. Humboldt Professor in Econometrics and Empirical Economics (van den Berg 2009-2016) Außerfakultäre Einrichtungen > GESS - CDSE (VWL)
Fachgebiet:	330 Wirtschaft
Normierte Schlagwörter (SWD):	Humankapital , Fähigkeit , Gesundheit , Bildung , Ungleichheit
Freie Schlagwörter (Englisch):	Skills , Health , Inequality , Intergenerational Transmission , Education
Abstract:	This dissertation analyzes how skills and health as two facets of human capital affect labor market outcomes, education decisions and the intergenerational transmission of inequality. Moreover, it elaborates on how differences in skill and health arise using famines as macroeconomic shocks to the formation of human capital. Throughout, the point of view is an economic one. Skills and health are viewed as a means to generate direct or indirect returns, e.g. in the form of higher wages or lower health care costs. The thesis covers three aspects of the economics of human inequality: the formation of skills and health, their impact on the transmission of inequality, and the effect of skills on education or labor market outcomes. First, in a joint chapter with Rémi Piatek, we establish that individuals with a more internal locus of control earn higher wages, and that this effect mainly operates through the channel of higher education. In the last chapter of this thesis I show that paternal unemployment causally reduces offspring educational attainment and that a child's subjective probability of school success is an important mechanism through which this effect operates. Second, in two joint chapters with Gabriella Conti, James Heckman and Arianna Zanolini on the one hand, and with Gerard van den Berg on the other hand, we ask how differences in skills and health capital affect next generation outcomes. The first of these chapters takes a closer look at the behavioral channels of maternal smoking and education, while the second one refers to the biological channel of epigenetic imprinting. Third, in a chapter with Gerard van den Berg and Johannes Schoch, we investigate how nutritional shocks during childhood affect health outcomes in adulthood. Econometrically and and with respect to identification, the dissertation takes two different approaches. In chapters two and three, factor structure models are implemented in a Roy model setting to address the problem of measurement error that arises if skills and health are measured using imperfect proxies. The estimation and identification relies on a form of matching on unobservables. In chapters four and five, identification comes from an exogenous variation. Famines are used as an instrument that exogenously shifts part of the population into a state of adverse childhood conditions. Chapter six uses a combination of both approaches. The thesis combines research on two strands of ideas that are novel to the economic literature. First, human capital is increasingly viewed as a broad and multifaceted concept that does not only comprise IQ, schooling or other cognitive measures, but also personality variables, mental and physical health. Second, nature and nurture are inseparable. The genetic make-up, phenotype and character of an individual is influenced by in utero and childhood conditions, and life experiences cause epigenetic imprinting, which in itself is heritable to subsequent generations. From a policy perspective, economic research that incorporates multifaceted human capital and the interaction of nature and nurture are needed. First, if human capital is multidimensional policy makers need to know its facets which are most important with respect to labor market outcomes and adult health. Second, if nurture determines nature, research needs to identify sensitive and critical periods, as well as favourable and unfavourable conditions for the development of human capital. The second chapter of this dissertation contributes to the first strand of literature. It investigates how locus of control as a particular facet of human capital influences labor market success and establishes that individuals with an internal locus of control, i.e., who believe that reinforcement in life comes from their own actions instead of being determined by luck or destiny, earn higher wages. However, this positive effect only translates into labor income via the channel of education. Factor structure modeling is implemented on an augmented data set coming from two different samples. By so doing, we are able to correct for potential biases that arise due to reverse causality and spurious correlation, and to investigate the impact of premarket locus of control on later outcomes. The third chapter combines research on multifaceted human capital and on the interaction between nature and nurture. It focuses on newborn health outcomes as are an important ring in the chain of intergenerational transmission of disadvantage. The chapter contributes to the literature on the determinants of health at birth in two ways. First, we analyze the role of maternal endowments and investments (education and smoking in pregnancy) in the probability of having a baby who is small for gestational age (SGA). We both estimate the total impact of maternal endowments on birth outcomes, and we also decompose it into a direct, ``biological'' effect and a ``choice'' effect, mediated by maternal behaviors. Secondly, we estimate the causal effects of maternal education and smoking in pregnancy, and we investigate whether women endowed with different traits have different returns. We find that cognition affects birth outcomes primarily through education, that personality traits mainly operate by changing smoking behavior, and that the physical fitness of the mother has a direct, ``biological'' effect on SGA. We also find significant heterogeneity in the effects of education and smoking along the distribution of maternal physical traits, suggesting that women with a less healthy physical constitution should be the primary target of prenatal interventions. The fourth chapter stands at the crossroads of economics and human biology. It investigates findings from the recent biological literature according to which lifetime experiences of one generation affect later generations through epigenetic imprinting. Recent studies have found an association between an individual's famine exposure at ages 8-12 and her grandchild's longevity, as well as cardiovascular and diabetes mortality in a single historical dataset. In this chapter, we investigate the validity of these findings, by analyzing the impact of the German famine of 1916-1918 on the children and grandchildren of individuals who were affected by the famine. We find that male second-generation individuals are shorter if their mother has been affected and taller if their father has been affected. Among the third generation, males tend to have higher mental health scores if their paternal grandfather experienced the famine and females tend to have higher mental health scores if their maternal grandmother was affected. We do not find robust effects on schooling as measured by the probability of obtaining a higher secondary school degree. The fifth chapter again focuses on the idea of human capital formation. It uses famines as exogenous variation, but this time estimates the causal effect of a nutritional shortage during childhood on adult health as opposed to the overall reduced form famine effect. We estimate this average causal effect on adult height as a proxy for late life health outcomes, by applying instrumental variable estimation, using data with self-reported periods of hunger earlier in life, with famines as instruments. The data contain samples from European countries and include birth cohorts exposed to various famines in the 20th century. We use two-sample IV estimation to deal with imperfect recollection of conditions at very early stages of life. The estimated average causal effects often exceed famine effects by a factor three. The last chapter investigates the impact of an important economic shock, namely paternal unemployment, on child education decisions. It uses exogenous variation in the local unemployment rate to identify the unemployment effect and to this end combines German representative household data with labor market information on 97 regions for the years 1998-2009. I find that paternal unemployment decreases the probability of upper secondary school choice by around 18 percentage points. Further, paternal unemployment has negative effects on measures of child self-confidence, locus of control and mental health. My results indicate that the subjective probability of school success is an important mechanism through which paternal unemployment influences a child's educational choices. This finding is consistent with a theoretical framework where paternal unemployment affects the return to education through the subjective probability of successful school completion.