Session: Effect of Obesity
Room: Hollister 306
Time: Wed 08:30-10:00

Presenter: Lene Kromann (Aarhus University. Economics)

Discussant: H. Shelton BrownTexas Medical Center

Abstract

This paper offers a study of possible favoritism of normal-weight individuals when firms make decisions on hiring, firing and promoting. Previous studies in the area mostly use human capital wage equations to look at wage dispersion between normal- and overweight, but fail to account for other aspects of firms' behavior, such as lower rates of offers to overweight individuals. Further, the wage equations do not capture the sorting of workers into different occupations and industries. By using an equilibrium search model (ESM), search friction and cross-firm differences in factor productivity can be taken into account when looking at firm behavior. Additionally a multinomial logit model is used to look at the occupation and industry distribution. Both analyses controls for age, gender and education.
Most importantly we have found that the wage difference between normal-weight and overweight and obese that many studies find, actually to a large extent, can be explained by differential firm behavior both with respect to the job offer arrival rate and to what extend they promote workers. Concretely, in the summary statistic we find that for earnings and unemployment rate the difference among weight groups are much more pronounced for females than for males. This agrees with the findings in the ESM where females overweight and obese are the only which are treated differently of the firms. Whereas, both males and females are affected when it comes to the occupational and industrial distribution. Overweight and obese are less represented in the three top occupations. Further the trade industry hire overweight and especially obese workers to a lesser extent than other industries. Since those outside the labor force were excluded the problem of unfair treatment can be even worse than what we have found. Hence, all in all we are lead to conclude that overweight and obese individuals are treated differently in the labor market than normal-weight individuals are. They suffer an economic penalty perhaps not unlike the penalty that black individuals, women, and the disabled have traditionally endured. Thus unfortunately the difference in firm behavior affect overweight’s social rewards such as income, material assets, standard of living, and social expulsion.     

Key Terms

Firm behavior, Equilibrium Search Model, Multinomial Logit

Authors:

Lene Kromann (Aarhus University. Economics)