The Long Reach of Childhood Health Problems on Education, Earnings and Health

According to existing literature, early-life health affects later labor market outcomes such as earnings and work effort. We examine whether this holds for multiple dimensions of health and regardless of a country’s health-care system. We ask whether mental and physical health problems and poor general health by age 15 have similar or different influences on lifetime earnings, on years of schooling and on health problems later in life. Then we ask whether the health-care system the child lived in influenced the estimated effects of early health problems on lifetime earnings. We expect that early health problems reduce earnings and the most generous system is tied to the least negative long-term effects.

Our analysis uses individual-level data from the first three waves of SHARE, a multidisciplinary and representative cross-national panel of the European population aged 50-plus. Waves 1 (2004/05) and 2 (2006/07) include information on sociodemographic background characteristics, current health, and socioeconomic status, as well as expectations of retirement age. Most of the data we use are from the third wave, SHARELIFE (2008/09), which is a retrospective survey conducted in 13 European countries as part of the SHARE project.

We use our respondent’s country of childhood and a four-way system to characterize the health-care systems they lived in as children based on descriptions in the U.S. Social Security Administration’ Office of Policy (2002). These four groupings are: full coverage; considerable use of co-payments; limited coverage; and Socialist (full coverage but limited care). We find that the health-care system does make a difference in the size of the earnings penalty.