Health and productivity in Peru: Estimates by gender and region

Health and Productivity in Peru: Estimates by Gender and Region Rafae l Cortez 1 This chapter seeks to measure the effect of health on the hourly wages of adult men and women in the rural and urban areas of Peru. A health indicator based on the number of reported days of illness is utilized to verify the association of health with the wages of individuals, and to measure the returns of good health to productivity. The principal finding of the research is that the health indicator has a significant positive effect on the level of productivity as measured by wages. The study reports the results of health indicator impacts on the wages of four groups — by gender and across urban and rural populations. It also describes the most important differences in the determinants of wages by population group. It demonstrates that the rates of return to education may be overestimated when the instrumented health variable is not included, principally in the cases of urban women and rural men. The significant estimates of returns to health indicate that one less day of reported illness in a month increases the wage rate of urban and rural women by 3.4 percent and 6.2 percent, respectively. For men the increase is higher — 4.7percent and 14.2percent in urban and rural areas, respectively. Consequently, public and private investment in health should be recognized as mechanisms for increasing household income, principally in ru- ral areas where rates of return to health are high.