The impacts of health and nutrition on wages in Ethiopia

Abstract

The paper examined the impacts of health human capital indicators on wages using cross-section data from urban Ethiopia. The study took into account both measurement error and ability biases in the earning function using instrumental variable quantile regression (IVQR) to capture heterogeneous effects of a variable across the wage distributions. Nutrition status indicators as measured by height and body mass index (BMI) were significant predictors of wages. The marginal effects of height on wages were considerably large for women than men at almost all quantiles of the wage distribution suggesting that targeted nutritional investment and interventions for women were attractive both on the ground of efficiency and distributional aspects. Formal tests for equality of coefficients confirmed that the impacts of height were indeed heterogeneous across the wage distributions. Moreover, the study found significant and large differences in the height-wage premium at all quantiles between the young and old cohorts. The differences were reasonably reflecting the additional health human capital investments that belong to young cohorts. BMI had significant impact on wages at all quantiles of the wage distributions only for young cohorts and women because women were relatively involved in lower paid jobs that require sustained physical inputs and bodily strength. Key words: Nutrition, health, wages, instrumental variable quantile regression, Ethiopia.