The effect of health on labour supply in nine former Soviet Union countries.

ABSTRACT

This paper examines for the first time the consequences of ill health on labour supply for a sample of nine countries from the former Soviet Union (FSU), using a unique multicountry household survey specifically designed for this region. We control for a wide range of individual, household, and community factors, using both standard regression techniques and instrumental variable estimation to address potential endogeneity. Specifically, we find in our baseline ordinary least squares specification that poor health is associated with a decrease in the probability of working of about 13 %. Controlling for community-level unobserved variables slightly increases the magnitude of this effect, to about 14 %. Controlling for endogeneity with the instrumental variable approach further supports this finding, with the magnitude of the effect ranging from 12 to 35 %. Taken together, our findings confirm the cost that the still considerable adult health burden in the FSU is imposing on its population, not only in terms of the disease burden itself, but also in terms of individuals' labour market participation, as well as potentially in terms of increased poverty risk. Other things being equal, this would increase the expected "return on investment" to be had from interventions aimed at improving health in this region.