Title: The Role of Unobserved Heterogeneity in Labour and Health Economics

Supervisor 1: Christoph M. Schmidt, Ruhr University of Bochum and RWI Essen, Germany

Supervisor 2: Andrew M. Jones, University of York, York, UK

Funding Institution: Alfried Krupp von Bohlen und Halbach-Stiftung Scholarship , 3 year PhD scholarship at the Ruhr Graduate School of Economics (http://www.rgs-econ.de/)

Start: 20 October 2004

VIVA: 30 April 2008

Final Grade: Summa cum laude

My thesis consisted of four papers: Two papers on the economic assimilation of immigrants and their children in Germany and two on the interrelationship of socioeconomic status and health. I spent one year during my PhD at the University of York to work on my second PhD paper and to do course work in Advanced Econometrics. During my PhD I also worked as a teaching assistant in Microeconometrics and Applied Microeconomics.

The overarching theme of my PhD thesis is to understand better to what degree unobserved heterogeneity confounds the estimation of outcomes of interest. I happened to like topics in health economics and labour economics. I conducted all my analysis with the German Socio-Economic Panel (GSOEP). A overview of my PhD Thesis can be downloaded here:

Overview PhD: (----> PDF )

These are my four papers including abstracts (You can download all four papers in the PUBLICATIONS section).

(1) How does heterogeneity shape the socioeconomic gradient in health satisfaction? (Forthcoming in: Journal of Applied Econometrics)

Abstract: Individual heterogeneity plays a key role in explaining variation in self-reported health and its socioeconomic gradient. It is hypothesised that the influence of this heterogeneity varies over levels of health and increases over the life cycle. These hypotheses are tested by applying a threshold-specific alternative to the conditional fixed-effects logit and longitudinal data from Germany. Our results suggest that income influences health at the lower end, but not at the higher end of the health distribution, once unobservable factors are controlled for. The underlying assumptions of the statistical model matter for this conclusion, in particular for the older ge groups.

(2) Discrete Heterogeneity in the Impact of Health Shocks on Labour Market Outcomes (Job Market Paper)

Abstract: Empirical evidence from the psychology literature suggests that reactions towards health shocks depend strongly on the personality trait of locus of control, which is usually unobservable to the analyst. In this paper, the role of attitudinal traits in shaping the relationship between changes in health and labour supply are theoretically modelled by adopting the Grossman (1972) model. Using German longitudinal data, the predictions of the theoretical model are tested with two empirical strategies, one of which does not rely on observing the attitudinal data. We find that men with an internal locus of control are almost 50% less likely to reduce their labour supply than externally controlled men after having experienced a deterioration of health, ceteris paribus. Women do not differ in their coping behaviour, however internally controlled women are up to 7 percentage points less likely to be out of the labour market in contrast to externally controlled women. A side-result of our study is the finding that the trait of locus of control is relatively stable across a time period of seven years.

(3) Labour Market Outcomes of Immigrants in Germany - The Importance of Heterogeneity and Attrition Bias

Abstract: Heterogeneity in the ethnic composition of Germany’s immigrant population renders general conclusions on the degree of economic integration difficult. Using a rich longitudinal data-set, this paper tests for differences in economic assimilation profiles of four groups of foreign-born immigrants and ethnic Germans. The importance of time-invariant individual unobserved heterogeneity and panel attrition in determining the speed of assimilation is analysed. We find evidence for heterogeneity in the assimilation profiles for both annual earnings and unemployment probabilities. Robust assimilation profiles are found for two cohorts only. Omitted variables, systematic sample attrition and the presence of second generation immigrants in the sample influence the speed of assimilation, but do not change the overall picture.

(4) Labour Market Outcomes of Second Generation Immigrants: How Heterogeneous Are They Really?

Abstract: This study comprehensively the labour market outcomes of second generation immigrants in Germany portrays. Special attention is attributed to observable heterogeneity in terms of country of origin and unobservable heterogeneity in terms of parental human capital, neighbourhood effects, and marriage background. Pooled, static and dynamic panel data models, and a decomposition analysis are used to estimate and explain the average differences in hourly wages and unemployment probabilities separately for men and women. The results suggest that the second generation cannot be considered as one homogeneous group: some groups perform better, equally or worse than comparable German natives. Also, relative outcomes in wages depend mainly on observable characteristics, whereas relative unemployment risks are mainly driven by unobservable factors.