Earnings Gaps for Conspicuous Characteristics: Evidence from Indonesia

Recent research has begun to analyze the effects of height on earnings in Indonesia, a developing country with a large population. Little has been done on the potential effects of weight and general health status on earnings. Using a household production function, Grossman and Benham (1974) provide empirical evidence of the positive effect of good health on earnings. Carefully accounting for selection into the workforce and the potential endogeneity of our health variables, we use a sample of individuals between the ages of 25 and 55 from the Indonesian Family Longitudinal Survey (IFLS) to identify the effect of health on earnings and conduct Oaxaca-Blinder decompositions to identify possible discrimination. We compare these results to those using less conspicuous health measures such as blood pressure, cholesterol, and chest pain. Endogeneity of our health measures is subsequently addressed using several econometric methodologies. Results suggest that overweight males in Indonesia earn an income premium, while underweight females are subject to an income penalty.