Causal Effect of Health on Labor Market Outcomes: Experimental Evidence

PWP-CCPR-070-06

Abstract

Iron deficiency is widespread throughout the developing world. We provide new evidence on the effect of iron deficiency on economic and social prosperity of older adults drawing on data from a random assignment treatment-control design intervention. The Work and Iron Status Evaluation is an on-going study following over 17,000 individuals in Central Java, Indonesia. Half the respondents receive a treatment of 120 mg of iron every week for a year; the controls receive a placebo. Compliance is monitored carefully. Results from the first six months of the intervention are presented for adults age 30 through 70 years. Males who were iron deficient prior to the intervention and who are assigned to the treatment are better off in terms of physical health, psycho-social health and economic success. These men are more likely to be working, sleep less, lose less work time to illness, are more energetic, more able to conduct physically arduous activities and their psycho-social health is better. There is evidence that economic productivity of these males also increased. Among iron-deficient males assigned to the treatment who were also selfemployed prior to the baseline, hourly earnings rose substantially and so they earned more on a monthly basis. Benefits for women are in the same direction but the effects are more muted. The results provide unambiguous evidence in support of the hypothesis that health has a causal effect on economic prosperity of males during middle and older ages.