Andrew M. Jones and Stefanie Schurer
#8
Ruhr Economic Papers
Ruhr
Graduate
School
in Economics
ECON
RW I
ESSEN
Ruhr Economic Papers
Published by
Ruhr-Universität Bochum (RUB), Department of Economics
Universitätsstraße 150, 44801 Bochum, Germany
Universität Dortmund, Department of Economic and Social Sciences
Vogelpothsweg 87, 44227 Dortmund, Germany
Universität Duisburg-Essen, Department of Economics
Universitätsstraße 12, 45117 Essen, Germany
Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI Essen)
Hohenzollernstrasse 1/3, 45128 Essen, Germany
Editors:
Prof. Dr. Justus Haucap
RUB, Department of Economics
Competition Policy and Industrial Economics
Phone: +49 (0) 234/32 253 36, e-mail: justus.haucap@rub.de
Prof. Dr. Wolfgang Leininger
University of Dortmund, Department of Economic and Social Sciences
Economics – Microeconomics
Phone: +49 (0) 231 /7 55-32 97, email: W.Leininger@wiso.uni-dortmund.de
Prof. Dr. Volker Clausen
University of Duisburg-Essen, Department of Economics
International Economics
Phone: +49 (0) 201/1 83-36 55, e-mail: vclausen@vwl.uni-due.de
Prof. Dr. Christoph M. Schmidt
RWI Essen
Phone: +49 (0) 201/81 49-227, e-mail: schmidt@rwi-essen.de
Editorial Office:
Joachim Schmidt
RWI Essen, Phone: +49 (0) 201/81 49-292, e-mail: schmidtj@rwi-essen.de
Ruhr Economic Papers #8
Responsible Editor: Justus Haucap
All rights reserved. Bochum, Dortmund, Duisburg, Essen, Germany, 2007
ISSN 1864-4872 (online) – ISBN 978-3-86788-000-8
The working papers published in the Series constitute work in progress circulated to
stimulate discussion and critical comments. Views expressed represent exclusively
the authors’ own opinions and do not necessarily reflect those of the editors.
Ruhr Economic Papers
#8
Andrew M. Jones and Stefanie Schurer
RW I
ESSEN
Ruhr
Graduate
School
in Economics
ECON
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ISSN 1864-4872 (online)
ISBN 978-3-86788-000-8
Andrew M. Jones and Stefanie Schurer*
How Does Heterogeneity Shape the Socioeconomic Gradient
in Health Satisfaction?
Abstract
Individual heterogeneity plays a key role in explaining variation in self-re
-
ported well-being and, in particular, health satisfaction. It is hypothesised that
the influence of this heterogeneity varies over levels of health and increases
over the life-cycle. These hypotheses are tested with data on health satisfac-
tion from 22 waves of the German Socioeconomic Panel (GSOEP). Nonlinear
fixed effects methods that allow for unobserved heterogeneity are not readily
available for categorical measures of well-being. One common solution is to
revert to conditional fixed effects methods, at the price of a high degree of in-
formation loss.Another common solution is to ignore the association between
unobserved heterogeneity and socio-economic status by using pooled or ran-
dom effects models, at the price of potential bias. We use a generalization of
the conditional fixed effects logit, that allows for individual-specific reporting
bias, heterogeneity in health endowments, and heterogeneity in the impact of
income on health satisfaction. Adjusting for unobserved heterogeneity ac-
counts for the relationship between income and very good health, but not
between income and poorer health states. The income gradient for older
age-groups is more strongly affected by controlling for unobserved heteroge
-
neity: revealing an increasing influence of heterogeneity on health satisfaction
over the life-span.
JEL Classification: I12, C23
Keywords: Panel data, generalized conditional fixed effects logit, generalized
ordered logit, health, GSOEP
May 2007
*Andrew M. Jones, University of York; Stefanie Schurer, Ruhr Graduate School in Economics
and RWI Essen. – We would like to thank Nigel Rice and the Centre for Health Economics, York,
UK, for their support and valuable contributions. We also would like to thank Jan Brenner, Paul
Frijters, Pilar García Gomez, John Haisken-DeNew, Michael Shields, and participants of the
Health, Econometrics, and Data Group at the University of York, York, UK, the Brown Bag
Seminar at the RWI Essen, Essen, Germany, the First Doctoral Conference of the RGS in
Economics, University of Dortmund, Germany. – All correspondence to: Stefanie Schurer, RGS
Econ, c/o RWI Essen, Hohenzollernstr. 1-3, 45128 Essen, Germany. Fax: +49 201 81 49-200, email:
schurer@rwi-essen.de.