Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 35/2005: Earnings persistence across generations: Transmission through health?

Tor Eriksson (), Bernt Bratsberg () and Oddbjørn Raaum ()
Additional contact information
Tor Eriksson: Aarhus School of Business, Department of Economics, Postal: Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Bernt Bratsberg: The Ragnar Frisch Centre for Economic Research, Postal: Gaustadalléen 21, N-0349 Oslo, Norway
Oddbjørn Raaum: The Ragnar Frisch Centre for Economic Research, Postal: Gaustadalléen 21, N-0349 Oslo, Norway

Abstract: Using a unique data set that links adult labour market outcomes and health status of a cohort of Danes and their parents, we study the interrelationships between transmission of health and economic status across generations. We first establish new evidence on intergenerational earnings resemblance in Denmark, obtaining estimates of father-child earnings elasticities of .29 for sons and .27 for daughters. Next, we show that children from low-income families are more likely to experience health problems in adulthood, and that poor health outcomes, such as back illness, heart disease, and psychological illness, affect labour earnings negatively. The data further reveal strong correlations of health outcomes across generations. When we condition on health status, estimates of the intergenerational earnings elasticity drop by a substantial amount—28 percent for sons and 25 percent for daughters. These findings point to parental investments in health and resemblance of health across generations as factors behind the pattern of low intergenerational earnings mobility observed in many countries.

Keywords: Intergenerational mobility; health and earnings

JEL-codes: J28

26 pages, December 30, 2005

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