Economic Importance of Health in the Russian Federation

Yevgeniy Goryakin, University of California, Berkeley

In this paper I examine the association between various measures of health and earned income in Russia. I find that those measures of ill health whose diagnosis depends on the contact with the medical care system have a relatively weak association with earned income, possibly reflecting misclassification bias. The lesson is that in a country like Russia were many people have undiagnosed medical conditions, the use of these measures will likely lead to underestimation of the economic returns to health. I also find larger wage returns to health for males, rural dwellers and unskilled workers. The effect is even stronger for those dimensions of health that are at premium in physically demanding occupations. The cost of ill health for unskilled workers may be particularly severe, as employers adjust their wages more readily when a health shock to them occurs.