Working Papers,
University of Aarhus, Aarhus School of Business, Department of Economics

Abstract: relationship. In addition, such a relationship takes place early in life and keeps on evolving over time so that both one’s health and SES at a given point in time result from the cumulative effects of this spiral. Thus, only by simultaneously accounting for both pathways as well as for their dynamics would one be able to provide a clear picture of both the process of health accumulation and the dynamics of SES formation. We estimate a structural model where a variety of causal paths between different health dimensions and SES measures as well as their dynamics are simultaneously accounted for. This allows distinction between significant causal paths and insignificant ones, while accounting for endogeneity as well as for cofounders. We use the SOCIOLD survey where the targeted population is that of the older workforce (50 and older) from six EU countries (Denmark, Finland, France, Greece, the Netherlands and the UK). Our results show that (i) reverse causality is indeed a crucial issue: one’s previous socio-economic status influences current health and previous health influences current socioeconomic status, (ii) there are cumulative effects in the sense that both health and socio-economic statuses depend on their past values and (iii) the results are sensitive to whether simultaneity is explicitly accounted for or not.

Keywords: Health status; Socio-economic status; Causal paths; Asymptotic least squares

JEL-codes: C31; I10; J14

54 pages, January 1, 2007

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