This dissertation is composed of three essays which examine the effects of health
on labor market outcomes. Chapter 1 reviews the literature on health and the labor
market. It also emphasizes the inherent endogeneity of health when included in models
for labor market outcomes. It goes on to highlight the empirical methods most often used
to accommodate that endogeneity.
In chapter 2, I use 2000 to 2007 data from the Medical Expenditure Panel Survey
(MEPS) to examine the role of health status in decisions to transition to self-employment.
Much of the past literature has incorporated health status in models for self-employment
in a perfunctory fashion. I account for unobserved heterogeneity and endogenous initial
conditions using a discrete factor random effects model. Three hypotheses for the direct
effect of health on the self-employment decision are put forth. The indirect effect that
health may have in determining one’s valuation of health insurance coverage is controlled
for in the model. Regression results indicate that individuals who experience any sort of
functioning limitation, or who report relatively poorer health, are more likely to transition
to self-employment over wage-employment, holding all else constant. Although the
magnitude of the impact of health status varies between two sub-groups of the population
studied.