ARTICLE IN PRESS

Economics of Education Review 24 (2005) 149–160

www.elsevier.com/locate/econedurev

Does education cause better health? A panel data analysis

using school reforms for identification
Jacob Nielsen Arendt
Institute of Local Government Studies, Nyropsgade 37, 1602 Copenhagen V, Denmark

Received 26 September 2002; accepted 14 April 2004

Abstract

We address whether the relationship between education and health can be interpreted causally. Alternatively, both
may be determined by common unobserved factors such as individual time preferences. We add to the primarily US-
based evidence by using a Danish panel data set of employed persons, and use Danish school reforms to instrument
education effects on self-reported health (SRH), body mass index (BMI) and an indicator for never been smoking.
Education is related to all three measures in the expected way and the relationships are amplified in magnitude when
education is instrumented. However, as the standard errors also increase when using instruments, neither exogeneity
nor the null of no effect of education can be rejected for SRH and BMI. We address important criticism of our
identification scheme, including tests for presence of weak instruments as suggested by Hahn and Hausman
(Econometrica 70 (2002) 163). None of the supplementary analyses reveal problems with the estimation strategy, so the
analyses remain inconclusive.
r 2004 Elsevier Ltd. All rights reserved.

JEL classification: I12; I20; J18; C35

Keywords: Education effect; Health inequality; Selection bias; School reform

1. Introduction causally. This is of tremendous importance for our

The interest in the relation between social status and
health is not new, but has received renewed interest
during the last couple of decades, both within academia
and in the public.1 In this paper we address whether
education related health differentials can be interpreted
Tel.: +1-45-33110300; fax: +1-45-33152875.
E-mail address: jna@akf.dk (J.N. Arendt).
1
Some examples are the MacArthur Research Network on
Socioeconomic Status and Health in the US and the Whitehall
studies in the UK or the British Acheson report (Acheson,
1998) and the Danish Health program 1999–2008 (Sundheds-
ministeriet, 1999).
understanding of determinants of health as well as for
our understanding of how schooling affects and shape
individual lives. Education may cause better health in
several ways. Education influences job opportunities and
income, which in turn may influence health. Education
may also enhance knowledge of how to live a healthy
life, leading to improved choices of use of time and goods
that affect health, see e.g., Kenkel (1991). Moreover, just
as education is believed to enhance market productivity,
education may enhance health productivity as argued by
Grossman (1972). There might also be non-behavioral
reasons for causal social gradients in health, e.g., relying
on psychosocial factors as described for instance by
Adler, Boyce, Chesney, and Choen et al. (1994).

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doi:10.1016/j.econedurev.2004.04.008
 ARTICLE IN PRESS
150 J.N. Arendt / Economics of Education Review 24 (2005) 149–160
However, there exist plausible reasons why education
related differences in health cannot be interpreted
causally. We focus on hypotheses suggesting that the
relationship between education and health may be due
to unobserved variables. This gives rise to a standard
missing variables problem, which biases estimates of the
effect of education on health. One important potential
missing variable is childhood health or more broadly,
health endowments shaped prior to educational attain-
ment. Another potential missing variable is the indivi-
duals preference for the future, because these preferences
affect the likelihood of engaging in activities with
current costs and benefits that are harvested in the
future. Educational attainment and good health beha-
vior can both be regarded as such activities. Therefore,
with health endowments and time preferences unob-
served, we may observe adults with low schooling and
poor health and vice versa, even when schooling plays
no direct role for health outcomes. Compared to the
significance of the subject, very few studies have
addressed whether education effects on health can be
given a causal interpretation.
We add to the existing literature by employing
institutional changes, Danish school reforms, to identify
education effects on health. Furthermore, we use a panel
data set of Danish workers, which allow us to control
for unobserved heterogeneity over time. Our analysis
provides evidence on data from outside the US, where
most of the existing evidence is from. We therefore
contribute to the task of providing robust evidence, less
sensitive to institutional settings and cultural habits,
which might affect the relation between health and
education. Finally, we address various criticism of the
identification scheme, which among others includes an
application of two new tests for the presence of weak
instruments.
The results show that education is significantly related
to both self-reported health (SRH) and body-mass index
(BMI; weight (kilograms) divided by squared height
(meters)) in healthy range. When the education effect is
instrumented, it increases in magnitude, but so does its
standard error. Therefore, we neither reject that educa-
tion is exogenous nor that it has no effect on SRH and
BMI. This result may be due to weaknesses of the
estimation strategy. In supplementary analyses it is
however not possible to detect any problems with
the estimation strategy. Therefore the results remain
inconclusive.
The paper is organized as follows. In Section 2 we
discuss theory on the relation between education and
health and mention results from previous empirical
studies. In Section 3 we present the data, and in Section
4 we discuss the empirical model. Section 5 presents the
school reforms and Section 6 contains the main
empirical analysis. Section 7 provides a discussion and
Section 8 concludes.
2. Theory and previous evidence
A useful starting point for the discussion of health
determinants is the reduced form model of the demand
for health, explicitly derived from a structural model,
from Grossman (1972). Related literature is discussed in
Grossman (2000). In this model, health depreciates over
time but is maintained by health investments depending
on consumed goods and activities that affect health.
Utility maximization determines health inputs as a
function of prices, wages, a depreciation rate and
technology parameters, yielding a reduced form model
of the demand for health as
H it ¼ aw wit þ ae E i þ aa Ageit þ at Dt þ Bit ; ð2:1Þ
where Hit is the health stock of individual i at time t, wit
the wage, Ei the education, Dt are time effects capturing,
e.g., prices of health inputs and Bit is an unobserved
component. The focus of our discussion is why Bit may
be correlated with education, thus that standard
estimates of ae not necessarily reflects a causal parameter.
A possible correlation between Bit and education may
be explained by the endowment hypothesis. This
hypothesis states that when those with higher ‘‘ability’’
obtain more education and when those with a high
health ‘‘endowment’’ (both interpreted broadly includ-
ing genetics, parental care and influences from the social
environment) are more healthy as adults, a correlation
between ability and health endowments will most likely
imply a correlation between education and adult health,
see e.g., Card (1999) and Rosenzweig and Schultz (1983)
for hypotheses about ability and endowments. The
endowment story also implies that health may have
important unobserved persistent components.
A second explanation for a correlation between Bit and
education states that individuals with higher preferences
for the future are more likely to engage in activities with
current costs and future benefits such as schooling and
health investments, and dates back to at least Fuchs (1982).
Grossman and Kaestner (1997, p. 87–93), mention studies
investigating the time preference hypothesis. The men-
tioned studies deals with health behavior, notably smoking,
and does therefore not deal with the education effects on
health per se. They conclude that the existing, sparse
evidence does not favor the time preference hypothesis.
The endowment story has a long history in empirical
work, where it is often dealt with using proxies, e.g., for
family background and test scores as control variables.
Examples of applications of this identification strategy
are Grossman (1975) and Behrman and Wolfe (1989).
The latter is also one of the few studies conducted on
data from outside the US (Nicaragua) where endogene-
ity of education is addressed. Behrman and Wolfe also
apply household fixed effects methods. The results from
both studies suggest that controlling for unobservables
does not alter education effects considerably.
 ARTICLE IN PRESS
J.N. Arendt / Economics of Education Review 24 (2005) 149–160
A number of studies have dealt with endogeneity of
education using instrumental variable techniques. Berger
and Leigh (1989) use per capita income and per capita
expenditures on education in the state of birth as
instruments for education in their study of education
effects on health on US data. They find that education
effects are slightly reduced, but remain significant, when
correcting for endogeneity. We note that these instru-
ments may be related to expenditures on health, which, if
health expenditures affect health, would disqualify them
as valid instruments. Lleras-Muney (2004) uses changes
in compulsory school attendance and child labor laws
from 30 US states from 1915 to 1939 to identify
education effects on mortality. She uses grouped US
census data as well as US individual data from 1985. The
results show that one year of education seems to increase
life expectancy at age 35 by more than a year. We note
that the instrumented education effects from individual
data are not significant. Adams (2001) adapts the
identification strategy suggested by Angrist and Krueger
(1991), using quarter of birth in a US cross-section of
individuals from 1992. Adams uses SRH and a number
of variables describing functional limitations as health
measures. When instrumental variable estimation is
used, education effects increase slightly but are insignif-
icant. Furthermore, F-values on the instruments are just
above 1, indicating a problem of weak instruments.
Arkes (2002) estimates education effects on work-limit-
ing health problems, on need for personal care and on
mobility limitations using a large US sample including
white males aged 47–56. Arkes uses within-state
differences in unemployment rates as instruments for
education. He also finds that education effects increase a
bit when allowing for endogeneity, and the effects are
significant for two of the three health measures. Finally,
Spasojevic (2003) uses changes in compulsory schooling
in Sweden in the fifties, analyzing education effects on a
constructed index of bad health and on an index of BMI
in healthy range over the period 1981–1991. She finds
positive significant (although only when using one-tailed
tests) from years of education on both.
As it stands, the existing evidence suggests that there
is a causal component running from education to health.
However, the evidence is still sparse, and many studies
suffer either from use of poor instruments, low precision
or from a focus on very narrow samples (e.g., with
respect to age or gender). In addition, few studies apply
datasets from outside the US or allow for individual
specific heterogeneity over time, which we do.
3. Data
We use a two-period data set of Danish workers
interviewed in 1990 and 1995 (The Danish National
Work Environment Cohort Study (WECS)), aged 18–59
151
in 1990. We exclude individuals under age of 25 in 1990
and observations with missing education data. There is
some attrition in the sample from 1990 to 1995, mainly
across different regions, whereas it does not seem to
affect the distribution of age, gender and occupation
(Borg & Burr, 1997). Therefore controlling for region is
necessary. The deletion of missing education might lead
to sample problems, but we obtain a sample, which
seems fairly representative of Danish workers, see the
appendix for more details. The sample consists of 1710
men and 1548 women observed in both 1990 and 1995.
The data set includes SRH, graded as poor, fair, good,
very good and excellent, which will be our main health
outcome. The data also includes measures more closely
related to health behavior. We will use BMI and an
indicator of never been smoking as supplemental out-
comes.
The use of SRH as a health measure has both pros
and cons. First of all it is believed to be a useful
summary measure of general health (see e.g., Case &
Deaton, 2002), possibly capturing dimensions of health
which is difficult to obtain with more ‘‘objective’’ health
measures. It also seems to be related to intervening
mechanisms leading to increased risk of functional
disability and mortality, see e.g., Mossey and Shapiro
(1982) and Idler (1994). However, SRH might be
reported with error, see e.g., Butler, Burkhauser,
Mitchell, and Pincus (1987). An example is that people
in deprived situations might ‘‘justify’’ their situation by
claiming that their health is poorer than it actually is.
Changes in norms and the business cycle may lead to
similar biases. Indeed, the state of the economy changed
from a downturn in 1990 to an upturn in 1995, and
health norms might have changed because of stagnating
longevity and focus on unhealthy lifestyles in Denmark
during this period. To control for such general changes
in self-reporting behavior over time, a time dummy is
included in all estimations. If reporting errors in SRH
are related to education it introduces a spurious
correlation between SRH and education. However, if
the error is unrelated to the variables used to instrument
education, instrumental variable estimation solves the
problem.
4. Empirical model
We use an ordered quantal response panel model and
a linear regression model, respectively, to model SRH
and years of education:
H it ¼ X 1it b þ gE i þ ai þ it ;
X
K
H it ¼ 1ðH it 4cj Þ;
j¼1
E i ¼ X 1it P1 þ X 2it P2 þ V it ; (4.1)
 ARTICLE IN PRESS
152 J.N. Arendt / Economics of Education Review 24 (2005) 149–160
where H nit is the latent health for individual i in period t,
Hit is observed health category, changing value when H*
crosses an unknown threshold, cj, Ei is years of
education, X1i are exogenous regressors in the health
equation and X2i are instrumental variables for educa-
tion. ai is an individual specific effect capturing the idea
that unobserved individual components determined
prior to educational attainment selectively sort indivi-
duals into high- and low-health groups, and eit is
assumed to be random. When Vi and ai are correlated,
e.g., for reasons discussed in the previous section,
education is endogenous. Note that it is assumed that
the variables X1 are uncorrelated with both ai and eit. We
therefore limit X1 to consist of age, a year dummy and
dummies for region of living. All may have important
health components, and in addition, the former is
required for identification (see the next section) whereas
the two latter are required because of the sampling
scheme (see the previous section). To avoid multi-
collinearity problems we do not control for cohort.
Therefore, age may be related to ai, because the latter
includes cohort effects. Whether this gives rise to large
biases can be inferred from estimations on separate
cohorts, which is conducted in the last section.
To correct for endogeneity of education we use a
panel version of the two-stage conditional maximum
likelihood (henceforth referred to as 2SCML) estimator
suggested by Vuong (1984)2, assuming that the condi-
tional distribution of ai given Vi has a mean that is linear
in Vi3
Eðai jV i; X Þ ¼ ZV i ; s:t: ai ¼ ZV i þ wi ; ð4:2Þ
where Z is the regression coefficient of ai on Vi, such that
wi is orthogonal to Ei by construction. Substituting this
into the model we get
H it ¼ X 1it b þ gE i þ ZV i þ wi þ it : ð4:3Þ
A first stage estimation of Ei on (Xi1, Xi2) yields a
consistent estimate of Vi, which inserted into (3.3) allows
consistent estimation of g by a random effects proce-
dure. Following our discussion in the previous section,
the random effect could be a propensity to be healthy
unrelated to education. We refer to this estimator as the
2SCMLR estimator, where the R stands for random
effects.
2
2SCML can be advocated on several grounds. First, Monte
Carlo analyses show that 2SCML performs well in small
samples (Arendt, 2002), outperforming an alternative suggested
by Newey (1987). Further, 2SCML requires no distributional
assumptions on first-stage error terms, as for instance joint
maximum likelihood does. Indeed, 2SCML outperforms MLE
under misspecification of this error term (Mroz & Guilkey,
1992). Finally, 2SCML is easy to use.
3
This can be motivated from a joint normality assumption,
but this is not needed.
Note that the sign of the coefficient Z yields some
useful insights, as it is of the same sign as the correlation
between the individual specific health error term, ai ,
and the education error term, Vi. If Z is positive,
models where education is assumed to be exogenous
yield an upward bias, and vice versa if Z is negative.
If time preferences were the only reason for endogeneity,
we expect the sign of Z to be positive, because ai
and Vi contains only this one common factor. If
endowments were the reason for endogeneity, the sign
of Z describes the sign of the correlation between
education ability and health endowments, which could
go either way. A negative estimate is therefore an
indication that the endowment hypothesis matters
relatively more than the time preference hypothesis.
Finally, the t-test that Z is zero is a test for exogeneity of
education. We use a naive bootstrapping procedure to
obtain corrections of standard errors for the first-stage
regression, which are needed in order to do correct
inference.
5. School reforms as instrumental variables
In this section we discuss the use of instrumental
variables for education, using information on two
school reforms that took place in Denmark in 1958
and 1975.
Prior to the reform in 1958, pupils had to pass a test
after 5th form, in order to enter ‘‘the middle school’’ (the
6th to 9th or 10th year of schooling), which was
necessary for further education. If they did not pass
the test, they would continue schooling in another more
practically orientated track, ending schooling after 7th
form. From 1958 these early sorting mechanisms were
abandoned, such that only mild differences in curricu-
lum during 5th to 7th form occurred (Folketingets
Årbog, 1958). The formal tests after 5th form were
replaced by recommendations after 7th form, of whether
to continue school after 7th form. In addition, a
distinction between village and city schools was elimi-
nated. This meant that the number of lessons, which
prior to the reform was lower in the village school, was
brought to the same level as in the city schools. The
village schools also gained the same right as the city
schools to form classes from 8th to 10th form. This
increased the proximity of schools, necessary for
education beyond 7th form, outside larger cities. It is a
common view that the schooling structure prior to 1958
limited access to further education especially for
children from less educated backgrounds and for
children from the countryside, which the 1958 reform
helped to alleviate (Bryld, Haue, Andersen, & Svane,
1990; Hansen, 1982). The school reform in 1958
therefore lowered educational barriers and, in village
 ARTICLE IN PRESS
J.N. Arendt / Economics of Education Review 24 (2005) 149–160
schools, increased number of lessons and school
proximity for those wishing to attend 8th to 10th form.4
The reform in 1975 (Folketingets Årbog, 1976) raised
the minimum school-leaving-age, increasing the com-
pulsory years of education from 7 to 9 years. The extent
to which this had an impact on mean education is
however dubious, since most children already obtained 9
years of schooling. However, the reform in 1975 also
removed the distinction between two tracks during the
8th to 10th form, where one track prepared for
gymnasium and another track for other, mostly voca-
tional, educations.
We generate two dummy instrumental variables to
indicate whether individuals were affected by the
reforms in 1958 and 1975. For both reforms, we assume
that only pupils who entered 7th form after 1958 or 1975
were affected. This is crudely measured by whether
individuals turned 14 of age in 1959 and in 1976.
This amounts to a division of individuals into three
groups, those below age 34 in 1995, those aged between
33 and 51 in 1995 and those 51 or older in 1995.
Individuals in these groups were affected, respectively,
by the 1975 reform, by the 1958 reform and by none of
the reforms.
To ensure that the instruments generated by the
dummy variables are valid, we need to take account of
upward drifts over time in health, occurring for reasons
other than increasing educational attainment. If not
accounted for, the instruments would be correlated with
health through a common correlation over time. We
have to assume that other events, driving the upward
drifts in health, can be captured by a relative smooth
function, otherwise the design does not bring identifica-
tion (for a formal discussion, see Hahn, Todd, & Van
der Klaauw, 2001).
6. Results
6.1. Descriptive statistics
In Table 1 we present descriptive statistics on age,
education and SRH. SRH takes value one for excellent
health and five for poor health. From the second
column, we see that mean SRH decreases (i.e., health
improves) with length of education and increases
with age. Simple logit estimations (not reported for
brevity) of SRH on dummies for each length of
educational attainment and age groups, show that age
affects SRH linearly but that a non-linearity occurs
4
Examples of use of related instrumental variables from the
wage literature is given in Harmon and Walker (1995) and
Meghir and Palme (2001), using compulsory schooling laws,
and Kane and Rouse (1993) and Card (1995), using proximity
of schools.
153
when crossing 11 years of education. The latter is
primarily due to the very poor health of semi-skilled
people who are categorized as having 11 years of
education. This is a maximum, which makes the outlier
look more extreme. They only constitute 5% of the
sample and do not seriously affect the results.
6.2. The effect of school reforms on educational
attainment
In Figs. 1 and 2 the mean years of education is shown
(separately for men and women) in the year where
individuals turned 14. At age 14 pupils may enter 7th
grade, which is the age that divides people into whether
they are affected by reforms or not. Two vertical lines
are placed at 1958 and 1975, the years where the reforms
were introduced. From both figures we see that, on top
of a general increasing trend in educational attainment,
educational levels jumped after 1958. The necessary
condition for the 1958 reform to affect educational
attainment therefore seems to be fulfilled. The changes
induced by the 1975 reform are not as evident, as
expected.
In order to infer more specifically to what extent the
reforms have an impact on educational attainment, we
report results from the first stage regressions for years of
education regressed on the reform dummies, age, a 1995
dummy and regional dummies. The results are reported
in Table 2. The third and sixth columns contain the
results with a quadratic in age, and it turns out that the
quadratic term is insignificant for both men and women.
The predicted profiles of the quadratic are very close to
that of the linear. As mentioned above, the same is true
for the relation between age and SRH. For these
reasons, we will use a linear age function. From the
second and fifth columns, with age included linearly, it is
seen that the impact from the 1975 reform is not
statistically significant and it is lower than the effect of
the 1958 reform. Those affected by the 1958 reform have
significantly higher educational attainment on top of a
linear age trend and regional differences. This holds for
both men and women; raising years of education on
average by 0.35 year for women and by 0.4 year for men.
The F-values of joint significance of both instruments
are 3.65 for women and 4.47 for men. Although this is a
bit low (see e.g., Staiger & Stock, 1997, recommending a
value above 5), indicating a possible problem of weak
instruments, the values are still higher than what has
been reported in many other comparable studies.
Finally, we show results from reduced form ordered
logit models of SRH, i.e., where the reform dummies are
included and education is excluded from the health
equation, in column four and seven. Both reforms are
seen to be insignificant (although only the impact of the
1975 reform for men has the wrong sign), but since these
are reduced form coefficients, they do not rule out that
 ARTICLE IN PRESS
154 J.N. Arendt / Economics of Education Review 24 (2005) 149–160

Table 1
Summary statistics from WECS data, 1990 and 1995

Variable Men Women

Sharea Mean SHRb Share PHc Sharea Mean SHRb Share PHc

Years of education
7 0.046 1.797 0.184 0.063 1.903 0.224
9 0.035 1.746 0.144 0.048 1.853 0.227
10 0.026 1.611 0.133 0.045 1.636 0.114
11 0.052 1.876 0.208 0.047 1.826 0.208
12 0.040 1.573 0.110 0.103 1.636 0.125
13 0.486 1.636 0.127 0.309 1.551 0.096
14 0.069 1.551 0.089 0.146 1.636 0.121
16 0.133 1.546 0.103 0.198 1.544 0.088
18 0.113 1.473 0.049 0.040 1.524 0.097
Age
25–34 0.242 1.514 0.080 0.214 1.489 0.077
35–44 0.370 1.600 0.108 0.392 1.596 0.116
45–54 0.291 1.687 0.157 0.314 1.693 0.140
55–65 0.097 1.767 0.148 0.080 1.842 0.198
All No. Obs Mean SHRb Share PHc No. Obs Mean SHRb Share PHc
3420 1.621 0.119 3096 1.623 0.122
Note: Calculated for pooled data in 1990 and 1995.
a
The share of observations in the given group.
b
The mean of self-reported health status with value 1 corresponding to very excellent health and 5 to very poor.
c
PH is short for poor health, which corresponds to the three worst outcomes.

Lowess smoother, bandwidth = .15 Lowess smoother, bandwidth = .14

14 13.8333
Mean years of education
Mean years of education

12.5
1948
Year when turned 14
Fig. 1. Mean years of education by year when turning 14 of
age, men. Note: The mean years of education in 1990 and 1995
for every cohort in the sample are shown by dots. On the first
axis, the sample is divided into cohort by the year in which
turning 14 years of age. In 1948, the mean is therefore for men
are born in 1934. The solid line shows a smoothed plot using the
lowest spline smoother.
the reforms have an impact on education and education
has an impact on health. The results do however again
indicate that the explanatory power of the reforms may
be weak. We return to this issue below.
11.5
1948 1978
1978 Year when turned 14
Fig. 2. Mean years of education by year when turning 14 of
age, women. Note: See note to Fig. 1.
6.3. Logit estimates of the effect of education on SRH
Table 3 contains estimates of the model in (4.1) using
a simple ordered logit and the 2SCML estimator with
and without random effects. The model includes a year
dummy for 1995, 17 regional dummies and age included
as control variables. Since a higher value of SRH
indicates worse health, a negative coefficient implies
positive covariation with better health. In Table 3
column (1), a simple ordered logit for men is presented.
 ARTICLE IN PRESS
J.N. Arendt / Economics of Education Review 24 (2005) 149–160 155

Table 2
First stage education regressions and reduced form SRH estimations

Outcome Women Men

Education Education SRH Education Education SRH

Constant 14,970 13,525 13.387 13,988

(0.556) (1.303) (0.545) (1.193)
Reform 1958 0.352 0.254 0.048 0.401 0.437 0.144
(0.172) (0.190) (0.132) (0.172) (0.184) (0.133)
Reform 1975 0.166 0.173 0.066 0.262 0.249 0.240
(0.302) (0.302) (0.235) (0.285) (0.286) (0.221)
Age 0.042 0.034 0.031 0.013 0.179 0.014
(0.011) (0.063) (0.008) (0.010) (0.055) (0.008)
Age 2/1000 0.911 0.365
(0.743) (0.644)
1995 0.207 0.212 0.084 0.065 0.064 0.132
(0.104) (0.104) (0.081) (0.100) (0.100) (0.077)
F-value 17 regions 8.77 8.80 31.42 12.22 12.21 56.00
F-value 2 reforms 3.65 1.04 0.98 4.47 3.82 1.28
Adj. R2 0.067 0.067 0.054 0.054
Observations 3096 3096 3096 3420 3420 3420
Notes: OLS regressions for education and logit estimation for SRH with standard errors in parentheses.

Table 3
Ordered logit models of SRH

Estimator Logit RE-Logit 2SCML 2SCMLR 2SCMLR

Men (1) (2) (3) (4) (5)

Education 0.091 0.109 0.153 0.223 0.430
(0.013) (0.021) (0.275) (0.292) (0.820)
Age 0.022 0.027 0.022 0.027 0.022
(0.004) (0.006) (0.004) (0.091) (0.034)
1995 0.099 0.111 0.103 0.118 0.029
(0.065) (0.089) (0.041) (0.091) (0.165)
Education residual 0.061 0.115 0.333
(0.276) (0.289) (0.823)
w2 -test, 17 regions 61.44 50.48 53.55 44.26 31.26
2Log-likelihood 6,699,77 6,533.21 6,699.73 6,533.12 3,013.01
Tests for RE 166.56 166.61
Women (6) (7) (8) (9) (10)
Education 0.079 0.089 0.207 0.251 0.223
(0.014) (0.016) (0.248) (0.241) (0.414)
Age 0.027 0.032 0.021 0.023 0.024
(0.005) (0.005) (0.004) (0.004) (0.030)
1995 0.105 0.125 0.117 0.141 0.097
(0.075) (0.077) (0.074) (0.076) (0.162)
Education residual 0.129 0.162 0.144
(0.250) (0.238) (0.415)
w2 -test, 17 regions 29.46 26.48 30.98 33.67 34.83
2Log-likelihood 6,149.08 6,091.42 6,148.88 6,091.17 3,056.45
Tests for RE 57.66 57.71
Note: All estimations are from ordered logit models. All standard errors in two-stage estimations are bootstrapped using a naive
bootstrapping procedure with 200 replications. School reforms in 1958 and 1975 are used as instruments. All estimations also include
17 regional dummies, and a w2 -test for their joint significance is presented. In the row ‘‘Tests for RE’’, the difference between 2Log L
for models with and without random effects are given. (5) and (10) contains 2SCMLR estimates for individuals aged 44–57 in 1995. (5)
are with 1462 observations and (10) are with 1500 observations.
 ARTICLE IN PRESS
156 J.N. Arendt / Economics of Education Review 24 (2005) 149–160
Both education and age are significant, education with a
coefficient of 0.091, and age with a coefficient of 0.022,
such that more educated have better health and the
elderly have worse health. An additional year of
education therefore corresponds to an odds ratio of,
e.g., having good or very good health of 1.095, i.e., each
year of education roughly improves the probability of
good or very good health by 10%.5 Below the parameter
estimates, a w2 -value for testing the null of joint
insignificance of 17 regional dummies is presented. The
null is strongly rejected.
In column (2) we allow for individual normal
distributed random effects, which are integrated out by
Gaussian quadrature. The presence of random effects is
tested, comparing estimations in (1) and (2) by means of
a likelihood ratio test; see the second and third row
below the parameter estimates. This is w2 -distributed
with one degree of freedom, and the null of no random
effects is rejected. The random effects estimate is a bit
larger in magnitude than the one without.
Before continuing to column (3) and (4), which allows
for endogeneity of education, we test the validity of the
reforms as instruments. Two conditions must be
fulfilled: a relationship with education and no relation-
ship with SRH given controls. Recall from Table 2 that
the former is fulfilled. The latter is tested by including
reform dummies one at a time in the second stage
conditional on the other reform (not shown). Both tests,
as well as when including the reform jointly in the
second stage, produce insignificant results with t-values
around 0.8.
Comparing likelihood values form 2SCML and
2SCMLR estimates in column (3) and (4), the null of
no random effects is again rejected. The 2SCMLR
estimates in column (4), show that the coefficient on
education increases (in absolute magnitudes) to 0.223,
which, however, is insignificant. Moreover, we reject
endogeneity by accepting the null that the coefficient on
the residual is zero.
Moving forward to the bottom part of the table, we
look at results for women. Education is strongly
significant in the simple logit with a coefficient at
0.079 in column (6), i.e., the effect is smaller than for
men. The estimators with no random effects are again
rejected against estimators with random effects and the
latter have higher education coefficients. Column (9)
shows the 2SCMLR estimates, accounting for both
random effects and endogeneity of education. Again, the
coefficient on education is much larger (in absolute
value) than the simple logit estimates, but as we saw for
men both education and the residual from the first stage
are insignificant. Leaving insignificance aside for a
5
Recall that in the hordered logit, coefficients
. and
i odds ratios
PðSRHpjjxþ1Þ PðSRHpjjxÞ
are related by: eg ¼ 1PðSRHpjjxþ1Þ 1PðSRHpjjxÞ , where g is
the coefficient to x.
moment, we note that for both men and women the
coefficients to education and the residual are of opposite
signs. As discussed in Section 4 this indicates a relatively
weak influence of time preferences, but leaves room for
one version of the endowment hypothesis. Indeed, it
need not be unrealistic that some people are endowed
with good health while less so with respect to their
mental ability and vice versa.
6.4. Logit estimates of the effect of education on BMI
and smoking
In this section we apply the same methods as above to
examine whether education affects BMI and an indicator
of never been smoking. Note that BMI and smoking are
more closely related to health behavior than SRH. There
is an additional subtlety about the use of the never been
smoking indicator, since a large share of smokers start
smoking during their teenage years. Therefore, this is a
variable that is determined simultaneously with education,
which should be captured by the 2SCMLR estimator.
Table 4 presents some descriptive statistics. The BMI
is within a so-called healthy range (19–25) for 55% of
the men and 72% of the women. 45% of the men are
overweight (BMI>25), which is the case for 21% of the
women. The table also shows that mean SRH follows a
U-shape for men, being higher for those with BMI
below 19 and above 25. Although this is not the case for
women, we follow common practice in this area and
model the event of having BMI in the healthy range
between 19 and 25. The share who has never smoked is
30% for men and 40% for women. This is also related to
SRH in the expected way and. Both smoking and BMI
are related to education.
Table 5 presents the estimation results. The top of the
table contains results for men, while results for women
are found in the bottom. Both random effect and
2SCMLR estimates are presented. The second and
fourth columns present evidence that for both men
and women, more educated are more likely to have BMI
in the healthy range and it is more likely that they have
never been smoking. Looking at 2SCMLR estimates,
exogeneity of education cannot be rejected for BMI,
whereas exogeneity is rejected when it comes to the
never been smoking outcome for both men and women.
Due to the latter result, one may say that the 2SCMLR
pass a test of validity. The coefficient on the education
residual is positive in the never smoking equation, which
can be interpreted as showing that those with higher
‘‘schooling ability’’ are less likely to start smoking.
7. Discussion and additional analyses
In this section we discuss the results from the previous
section. Although we cannot reject exogeneity of
 ARTICLE IN PRESS
J.N. Arendt / Economics of Education Review 24 (2005) 149–160 157

Table 4
Descriptive statistics for BMI and smoking, 1990 and 1995

Men Women

Sharea Mean SHRb Mean educc Sharea Mean SHRb Mean educc

BMIo19 0.01 1.63 14.40 0.07 1.56 13.64

19pBMIo25 0.55 1.56 13.76 0.72 1.60 13.17
25pBMIo30 0.38 1.65 13.07 0.16 1.69 12.50
30pBMI 0.07 1.86 12.18 0.05 1.90 11.71
Never smoked 0.30 1.51 13.84 0.40 1.60 13.32
Have smoked 0.70 1.67 13.20 0.60 1.64 12.85
Note: Calculated for pooled data, 1990 and 1995. BMI (body mass index) is weight (kg) divided by squared height (meters).
a
The share of observations in the given group.
b
The mean of self-reported health status with value 1 corresponding to very excellent health and 5 to very poor.
c
The mean years of education in the given group.

Table 5
Education effects on BMI in healthy range and never smoking indicator

Estimator RE-logit 2SCMLR RE-logit 2SCMLR

BMI in healthy range Never smoked

Men
Education 0.128 0.117 0.116 0.640
(0.015) (0.275) (0.016) (0.307)
Age 0.030 0.030 0.046 0.045
(0.004) (0.004) (0.005) (0.005)
1995 0.176 0.176 0.216 0.212
(0.073) (0.073) (0.080) (0.080)
Education residual 0.011 0.759
(0.028) (0.302)
w2 -test, 17 regions 19.26 19.22 25.81 26.24
Women
Education 0.063 0.084 0.084 0.639
(0.016) (0.336) (0.015) (0.305)
Age 0.021 0.020 0.006 0.033
(0.005) (0.019) (0.005) (0.017)
1995 0.087 0.093 0.013 0.178
(0.085) (0.124) (0.078) (0.112)
Education residual 0.021 0.725
(0.336) (0.306)
w2 -test, 17 regions 18.99 18.87 39.36 32.74
Note: From logit models, see Table 3.

education, the test for exogeneity does not have a
particular good power as the standard errors of the
2SCMLR estimates are large. It therefore seems reason-
able to further evaluate the identification strategy.
For both men and women, the estimated education
effect is larger in magnitude when endogeneity is allowed
for. As in the wage literature, this finding can be
interpreted as showing evidence of presence of measure-
ment error (Griliches, 1977), heterogeneity in education
effects (Card, 1999, p. 1821) or from a bias due to weak
instruments (Card, 1999; Staiger & Stock, 1997). We
choose to focus on the third interpretation, since this is
more likely to burden the interpretation of our analyses.
We limit attention to SRH.
We noted in Section 6.2 that the F-values from first-
stage education regressions may indicate a situation with
weak instruments. However, as Hahn and Hausman
(2002) point out, a weak instrument bias is determined
not only by the F-value from the first stage, but also by
the number of instruments and the correlation between
 ARTICLE IN PRESS
158 J.N. Arendt / Economics of Education Review 24 (2005) 149–160

unobserved components of the outcome and the Table 6

endogenous regressor (e.g., a and V in (4.1)). Hahn Testing for weak instruments, in a linear model for SRH
and Hausman (2002) suggest two tests using second
Education effect Men Women
order asymptotic theory for detection of weak instru-
ments. The tests in Hahn and Hausman (2002) are based OLS 0.034 0.029
on the linear regression model. Although our model is 2SLS 0.064 0.087
not linear, we use the tests as a tentative device for Reverse 2SLS 0.453 0.386
searching for these sources of bias. Second-order bias 0.119 0.108
The first test is based on the difference between 2SLS Nagar 0.064 0.087
and the inverse of reverse 2SLS estimates, corrected for Reverse Nagar 0.139 0.105
Optimal Nagar 0.068 0.091
an estimate of the second-order bias of this difference.6
Test 1 14.31 17.36
This is a test of whether first-order asymptotic theory
Test 2 0.40 0.09
seems reliable. The different estimators and the Hahn
and Hausman test statistics are found in Table 6. The Note: All estimates are from linear models with control for age,
OLS estimates of the education effects on SRH are a 1995 dummy and 17 regions. The estimators and tests are
from Hahn and Hausman (2002).
0.029 for women and 0.034 for men. The 2SLS
estimates are 0.087 for women and 0.064 for men.
Their relative sizes (between men and women, and column (5) and (10). For this specific sample the
between standard and IV estimates) are in agreement education coefficient is of qualitatively the same size as
with results using logistic models. The reverse 2SLS for the larger sample for women, while it increases even
estimate for women is 0.386, and the test statistic (Test further for men. It is noted that the age coefficient is not
1), which is a t-statistic, takes value 17.36. The test takes different from the estimates on the larger sample,
value 14.31 for men, i.e., the test rejects the conventional suggesting that cohort effects do not severely bias the
first-order asymptotic 2SLS estimates. Hahn and Haus- results.
man then suggest the use of a test based on forward and
reverse bias corrected Nagar type estimates (see their
article for details). The forward Nagar estimate is 8. Conclusion
0.087 for women and 0.064 for men, while the
inverse of the reverse Nagar estimate is 0.105 for It has been documented extensively that educational
women and 0.139 for men. That is, they are reasonably differences in health exist. Few investigations have
close. The second test statistic is 0.09 for women and considered whether the observed relationship describes
0.40 for men, thus second-order asymptotics is not a causal relationship. We have added to the existing
rejected. In this case, Hahn and Hausman recommend literature, applying new instrumental variables and
the use of LIML estimates, since they are second-order estimation techniques on a panel data set from outside
unbiased. This is also the case for the optimal Nagar the US, where most existing evidence is from.
estimator (Hausman, 1983, p. 413), which we have For both men and women, a longer education is
calculated. It is 0.091 for women and 0.068 for men, associated with better SRH. When endogeneity is
which are close to the 2SLS estimates. Given that OLS allowed for, this relationship increases in magnitude,
and 2SLS corresponded fairly well to the logit and but as is commonly found with IV methods, so do the
2SCML estimates, this indirectly suggests that the standard errors. Therefore, it cannot be rejected that
2SCML results are not severely biased from the presence education is exogenous to SRH, nor can the null of no
of weak instruments and that not much can be gained by effect of education be rejected. Similar results are
obtaining LIML estimates. obtained when BMI is used as health outcome. The
We end the discussion by pointing out that the school results are based on the use of school reforms as
reform instruments essentially compare individuals from instruments for education, and we showed that educa-
very different cohorts. In order to narrow down the tional attainment jumped to a higher level in the years
potential sources of variation causing improvements in following the 1958 reform. As with other studies of this
health over time besides educational reforms, we kind, the power of the procedure is poor. The reliability
conduct estimations for individuals aged 44–57 in of the estimates was investigated using an outcome often
1995. These are individuals who entered 7th form in determined simultaneously with education (never
one of the six years just before the 1958 reform and smoked), by looking at results for specific cohorts and
individuals who entered in one of the six years after the by the use of tests for weak instruments suggested by
reform. For this group of individuals there are 750 Hahn and Hausman (2002). These additional analyses
women and 731 men. Results are presented in Table 3, did not detect any problems with the estimation
strategy, so the results remain inconclusive about the
6
When 2SLS is given byy01 y^ 2 =y^ 01 y^ 1 , reverse 2SLS is:y01 y^ 2 =y^ 02 y^ 2 . effect of education on health.
 ARTICLE IN PRESS
J.N. Arendt / Economics of Education Review 24 (2005) 149–160
Acknowledgements
The first version of this paper was from my Ph.D.
Thesis from University of Copenhagen. I am grateful to
the Danish National Institute of Social Research for
giving me access to the WECS Data. I appreciate very
valuable comments from two referees, from the editor
and from my supervisors Karsten Albaek and Martin
Browning, from Thomas Crossley, Michael Grossman
and Bo E. Honoré as well as from participants at the
Health Econometric Workshop in Odense, the EDGE
Jamboree in Munich, the CAM Lunch Seminar in
Copenhagen and at a Invited Seminar at Department of
Economics, Lund University. All errors are mine.
Appendix. Definition of variables and sample selection
The WECS was collected by the Danish National
Institute of Occupational Health (AMI) and the
National Institute of Social Research (SFI) as a
representative survey of Danish citizens aged 18–59 in
1990 with a follow-up survey in 1995. Borg and Burr
(1997) describe the sampling method and how repre-
sentative the data is. The total sample of individuals
selected for interviews in 1990 and 1995 consists of
11,084 individuals. The response rate was 89.7% in 1990
and 80.2% in 1995, hence some sample attrition occurs.
Most of the attrition is due to migration, and some
attrition is due to death or refusal to participate. Those
who refuse do not differ with respect to gender and age
to those who participate. They do differ a bit with
respect to civil status (higher attrition among divorced)
and especially region (higher attrition among those
living in the capital area). Among those who partici-
pated in 1990 but not in 1995, there are more medium
level white collar workers and less unskilled or high level
white collar workers. Borg and Burr (1997) conclude
that the sample is representative to a reasonable degree,
and that attrition does not seem to be a big problem, at
least when regional status is accounted for.
We create our sample in the following way. We drop
911 observations with missing education information in
both 1990 and 1995. We drop 702 of the remaining
individuals who are under education in 1990. 38 are
excluded because they have missing, or untold education
in 1995, in addition to missing or untold schooling in
1995 and untold education in 1990. 2946 observations
are deleted because individuals were not interviewed in
both years. For 10 individuals, their age is reported as
more than 6 or less than 4 years in 1995 from the
reporting in 1990, i.e., erroneously, so we delete these.
Among the 6477 remaining observations, we keep the
3755 with non-missing SHR in both 1990 and 1995, who
are observed in both 1990 and 1995. The large number
of missing observations is present because the question
159
was only asked to people who were employed within the
last two months of the interview. Finally we drop those
under age 25, yielding a sample of 1710 men and 1548
women.
The education variables differ in 1990 and 1995,
because of a finer distinction between vocational
educations in 1995, and because short advanced degree
is not referred to as advanced in 1990. We therefore
chose to use the 1995 classification in 1990 to get a
consistent measure of education. When both education
variables are missing, we use the schooling variable in
1995. Years of education are defined as follows: 7 years:
7th Grade, 9 years: 9th Grade, 10 years: 10th Grade, 11
years: one year vocational or semi-skilled, 12 years:
Gymnasium or Other Short Educ, 13 years: Apprentice-
ship, 14 years: Short Advanced, 16 years: Medium
Advanced, 18 years: Long Advanced. The 18 regional
dummies are: One for each county (14) plus one for
Frederiksberg, Odense, Århus and Ålborg.
Compared to the original sample, see Borg and Burr
(1997) table 2.5–2.7, younger persons and those with
only primary school are under represented in our
sample. One reason could be that we exclude those
under education, who are included in the tables in Borg
and Burr (1997) if they have been employed within two
months. Overall, the sample seems to be reasonably
representative of employed individuals who have fin-
ished their education.
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